Understanding Savings Plan for Children
As your children age, it becomes crucial to make wise investments for their future financial stability[1]. A saving plan for children helps parents save money in a systematic way to secure their child’s future. A child insurance plan offers to take care and fund your child’s educational needs. This ensures that your child’s education and aspirations remain unaffected by financial uncertainties.
Types of Online Savings Options for your children
Various online saving schemes are available in the market, offering a reliable way to build a fund for your child's education.
1. Digital Gold
Investing in gold may also be a smart choice . Gold has non-depriciating value and has digital options like Gold ETFs (Exchange-traded Fund), SGBs (Sovereign Gold Bonds) and gold mutual funds available as well that can help build a corpus for your child's future[2].
2. ULIP for Children’s Education
A Unit Linked Insurance Plan (ULIP) are life insurance plans which combine life insurance with an investment component which is subject to market linked risk , making it a another way to secure your child's future. Part of the premium provides life cover, which ensures financial support for your child in case of unforeseen events. The rest amount is invested in market linked funds to earn returns over time[2].
3. Public Provident Fund
PPF is a long-term savings scheme with a 15-year maturity period. . The principal, interest, and benefits received are applicable for tax exemptions subject to conditions given under the Income Tax Act , 1961 making it one of the best savings plans for children[2].
How to choose the Best Savings Plan for Children
1. Early Investment
Parents mostly wait for their child to finish primary school to start investments, this could slow down the process of savings for you. Starting an early investment also helps you in changing investment plans or correct any investment errors if needed.[3]
2. Set Short-term and Long-term Goals
By setting short-term and long-term goals you will be able to assess your child's needs better. Short-term goals could be set for the next 2-3 years such as: investing in school fees or saving for extra-curricular activities. Long-term investments could involve planning for graduation or abroad education investments [3].
3. Purchase Term Insurance
You need to have a solid investment plan but the financial planning is incomplete unless you protect your child under a suitable life insurance plan[3].
4. Check for Partial Withdrawal Options
Emergencies can arise at times. A plan with a partial withdrawal option ensures that you can access funds for unexpected situations without compromising the overall goal of your child’s education fund.Partial withdrawals are available post the lock in period and subject to policy terms and conditions. [3]
5. Appointing a Nominee
Appoint a nominee for all your investments. In case of unfortunate events, your child might face issues in future. It also makes your investment plan solid and secure.[3]
Benefits of Online Savings Plan
With technological advancements, online platforms have made investing in savings plans for children easier than ever.
Convenience:
Set up and manage your plan anytime, anywhere.
Comparison Features:
Easily compare various insurance companies and choose a suitable one.
Cost-Effective:
Many online plans have lower fees.
Online platforms simplify the process, ensuring that investing in the best savings plan for children is hassle-free and accessible.
Conclusion
A child’s education is one of the most significant investments a parent can make. By choosing the best savings plan for children, you ensure that financial constraints never hinder your child’s dreams. Online savings plans offer a convenient and efficient way to secure their future, giving you peace of mind and your child the freedom to focus on their aspirations.
FAQs
1. Can I change the premium amount or payment frequency during the policy term?
Yes, many child-saving plans offer the flexibility to adjust your premium or payment frequency. This feature is especially helpful if your financial situation changes. It allows you to increase contributions for higher returns or reduce them to ease budget constraints. Always check for this option before buying the plan.
2. What happens if I cannot pay the premium on time?
Most of the child based include a grace period of 15 ( where premium is paid on monthly basis)-30 days ( where premium is paid on quarterly, half yearly or yearly basis) for the premium payments to be made. If you fail to pay within this period, your policy may lapse. While some child plans do offer a revival option within a specified time frame. Make sure you understand the terms to avoid losing your investments
3. How are returns taxed under the child savings plan?
Under the Income Tax Act 1961 taxation depends upon the plan you end up choosing. For instance, ULIP has tax benefits under Section 80C (under old regime) & Section 10(10D) subject to conditions. However, the returns from debt funds or recurring deposits can be taxable as per applicable provisions. Consulting a financial advisor in this situation is the ideal scenario.
References:
An ISO 9001:2015 
