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When Is the Right Time to Purchase a Savings Plan for My Child?

Over the past years, the cost of education has skyrocketed in India, panicking parents. While saving for the child’s future is of paramount importance, how much savings would suffice has been the most common yet most crucial question. Here, a well-chosen child savings plan will put worries to rest.Read More

While you decide to purchase one, the point that needs to be addressed at the first step itself is determining the best age to buy a child savings plan. But before that, knowing what a child savings plan is and how it works may help you understand the concept better.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: 21st Jan 2025
Modified on: 22nd Jan 2025
Reading Time: 15 Mins
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What is a child savings plan?1


A child savings plan is a long-term plan designed to support a child’s future and dreams with a life insurance component and a market linked investment component  combined. Under this plan, a parent can invest and grow  money to create a corpus for the child’s future goals while ensuring a safety net of financial backup if he/she dies an untimely death. As a parent, you may find it beneficial to ensure your child has sufficient financial resources in the future to support his/her life goals, even if the costs have risen over time.
 

How does a child savings plan work?
 

The life insurance component in a child savings plan provides life coverage for the parent like any other insurance plan and provides the sum assured to the child in the event of the unforeseen to help him/her continue with his/her  studies. The investment component, on the other hand, lets the policyholder invest and grow  money subject to market linked risks, which is handed to the child upon maturity of the policy. This takes care of the corpus building and the inflation to fund the child’s higher studies or other goals like marriage[1].

The uniqueness of child savings plans, however, lies in their waiver of premium feature. Here, even if the parent dies and the death benefit is paid, the policy continues to be active, and the premiums are borne by the insurer to pay a maturity benefit at the due time. The maturity amount in these plans can be paid in a lump sum at a particular age of the child or through regular payouts at different stages of his/her life. Thus, a child savings plan provides a solid financial backup to help the child’s academic career grow in the desired way, no matter what.

Let’s now get back to the question – when to purchase savings plan for children?
 

The right time to buy savings plan for a child
 

There is no specific best age to buy a child savings plan. Rather, the right time to buy a savings plan for a child may vary across individuals depending on the desired academic goals and the financial circumstances of the family. The basic idea[2] is simple— creating a substantial corpus over the years that would help the child reach career or personal milestones in the future without having to worry about the rising costs.

Ideally, when it comes to investing in a child savings plan, a parent should start as early as possible. This may enable him/her to regularly invest a tiny amount for a long period of time and get back a sizeable corpus through the power of compounding.

However, the following are the factors that can help you decide when to purchase a savings plan for your children.
 

The goals[3]:
 

The first and foremost factor here is to identify the goals or milestones for your child that you desire to fulfil with the savings, like funding your child’s overseas course, his/her admission in a good business school, or a lavish marriage ceremony. Unless you have the clarity of the specific goals, accumulating a fund may seem daunting, and in turn, it would be difficult to decide when to start a child savings plan.
 

The investment horizon[3]:
 

How long to stay invested may be the question that puzzles most when you plan to buy a child savings plan, because the best time to buy the policy should align to this time frame. Experts believe the period of investment should ideally depend on the milestone to be fulfilled, the time when it requires the corpus. Suppose Mr. A has a 2-year-old son and plans to send him to the best medical school when he is 18. So, in between he has 16 years and can purchase a plan whenever the financial situations are favourable.
 

The amount needed[3]:
 

The best age to buy a child savings plan may be based on the amount needed at maturity to fund the target milestone, keeping in mind the average cost and inflation. Accordingly, a parent may figure out his affordability and decide when to purchase a savings plan for the child. For example, suppose Mrs. B dreams of marrying off her daughter, now 10- years -old, when she is 25. Say after 15 years, she plans to spend Rs 20 lakhs for the wedding, taking into account the inflation rate.

The current scene[3]:
 

While saving for the child’s future through a child plan, it’s equally important to assess your current financial situation. Take note of the assets and the debt outstanding (if any).

The child plans grow money through compound interests. Needless to say, the longer the money stays invested, the bigger it gets through the accumulation of interests and returns. Starting early may therefore seem a win-win if you are financially stable enough to do that!
 

FAQs
 

Q1: Is it good to invest in a child savings plan?
 

Yes, it may be worth[1] it to invest in a child savings plan. The uniqueness of these plans is that they remain active even after paying the death benefit, and the insurer takes care of the remaining premiums. Once the policy expires in its due time, the nominee receives maturity benefit as well subject to the t&c of the policy.
 

Q2: What are the different types of child savings plans?
 

Child savings insurance plans are majorly of two categories[1]: i) Plans with market-linked return and ii) Plans with guaranteed* return. The first kind of plans invest a portion of the premiums paid into equities/debts/hybrid funds which lets your money grow in long term with returns subject to market fluctuations. The second category plans on the other hand offers stable, fixed and guaranteed* returns subject to policy t&c.
 

 

 

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IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER.

The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year.

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.

The views stated in this article are not to be construed as investment advice and readers are suggested to seek independent financial advice before making any investment decisions. For more details on risk factors, terms and conditions please read the sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale. Bajaj Allianz Life Insurance Company Ltd., Regd. office Address: Bajaj Allianz House, Airport Road, Yerawada, Pune - 411006, Reg. No.: 116, CIN: U66010PN2001PLC015959, Call us on toll free No.: 1800 209 7272, Mail us: customercare@bajajallianz.co.in

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*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.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


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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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Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*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%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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*Not available if policy issued after 14th July 2025.

 

^Benchmark: Nifty 500 Multifactor MQVLv 50 Index past 5 CAGR Returns, as on 30th May 2025. Past returns of a fund are not necessarily indicative of the future performance of the fund. | Please consult the financial advisor before investing.

 

The Unit Linked Insurance Products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender or withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of the fifth year.

 

ULIPs are different from the traditional insurance products and are subject to the risk factors. The premium paid in ULIPs are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions. Bajaj Allianz Life Insurance Company Limited is only the name of the Life Insurance Company and Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V02), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01),  Bajaj Allianz Life Fortune Gain II- A Unit-linked Non Participating Individual Life Savings Insurance Plan (UIN- 116L196V02) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V03) are only the name of the unit linked insurance contracts and does not in any way indicate the quality of the contract, its future prospects or returns. Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com ) carefully before concluding a sale.

 

Nifty 500 Multifactor 50 Index Fund is available Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V02), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01), Bajaj Allianz Life Fortune Gain II- A Unit-linked Non Participating Individual Life Savings Insurance Plan (UIN- 116L196V02) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V03)

 

In addition to the already existing funds, Nifty 500 Multifactor 50 Index Fund is now available with the above mentioned products. Customer has an option to choose from other available funds apart from Nifty 500 Multifactor 50 Index Fund

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I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any Call made, including via Voice over Internet Protocol & WhatsApp, SMS or WhatsApp messages, in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

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