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What Type Of Investment Plans Can Parents Buy To Fulfil Their Child’s Education Needs?

In recent times parents are feeling the pinch of inflation in the cost of higher education. Their apprehension is genuine as the NSSO reported that between 2008 and 2014, annual expenditure for the primary level to post graduation level education increased by 175 percent and annual expenditure for technical and professional education increased by 96 percent*.

Investment plans also act as tax-planning tools, as many avenues help reduce tax liability. There are different types of investment plans, and by choosing the right one, you can invest according to your needs and grow your savings.Read Less

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins

While there is no doubt that cost of higher education is increasing year on year, there is also no doubt that quality of education is going up spurred on by intense competition among educational institutions. The faculty is top class, the amenities are better, the campus is self-sufficient, the industrial interface is more involved, exposure to international experience is increasing due to tie-ups with renowned institutions from other countries and employers are demanding graduates with better quality of education and training. This augurs well for parents as their children can secure top class education setting them up nicely for lucrative and challenging careers in their lives ahead.

Parents want to provide the best of higher education for their children despite the costs of education going up in India. How can they provide for their child’s higher education?

There are several ways in which parents can plan for funding their children’s higher education. Parents can avail education loans with benefits of special rates of interest and a generous moratorium period. Some meritorious students can get scholarships. Some parents save systematically by investing in fixed deposits and real estate. These savings often get eroded by inflation. Investing in mutual funds and stock market are also means of savings for the long term. These investments carry a risk as they are linked to stock markets which are by nature fluctuating – up or down. Although they carry risks they provide an opportunity to beat inflation as historically the stock markets offer the best returns on a long-term basis.

Mutual funds are a convenient means of saving as investment professionals invest the pool of funds collected from investors in stock markets to get good returns for the investor. In a similar manner, there is another investment opportunity for parents in the form of life insurance where parents can buy child insurance plans to save systematically for their child’s future in addition to protecting the family from threat to life insured. Within life insurance, there is an opportunity to save for the medium long term with Unit-Linked Insurance Plans (ULIPs). Besides offering good returns ULIPs build upon the ‘propensity to save’ attitude regularly. ULIPs are also life insurance products protecting the family from any life threat to the insured parents.

ULIPs have two components – a life insurance component and an investment component. Out of the premium paid on the ULIP policy, a portion is used for providing a life insurance cover and the balance is used for investing in equity and debt instruments. The pool formed from the premiums collected from all policy holders is invested in equity and debt instruments by qualified and expert investment managers belonging to the life insurance company who use their experience to generate good returns for the policy holder. ULIPs offer the policy holder choice of investment plans based on his or her risk profile and investment objectives. Investing in ULIPs is like investing in mutual funds with the added benefit of life insurance cover. Additionally, to make it a foolproof investment plan, in case of any eventuality, ULIPs offer the flexibility of additional protection through riders. Various riders, such as the WOP (Waiver of Premium Rider), Accidental Death Benefit Rider, et al can help you protect the financial future of your loved ones at a very minimal cost. In case your goal is to save for your Child’s education, it is highly recommended that a ULIP with WOP rider should be your first investment choice.

Since planning for a child’s higher education is a long-term goal investing in ULIPs is an excellent avenue to support other savings. Along with other savings, ULIPs provide parents with a great option to beat inflation.

We at Bajaj Allianz Life would recommend that parents should start investing in ULIPs as soon as the child is born. The longer parents are invested in ULIPs better are the chances of higher returns and therefore better chances of providing quality higher education for their children.

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The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.


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%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

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