Investment in Child’s Future and Education is a wise financial decision. There are several Child Insurance plans available in the market. Although I do believe that ..Investment + Insurance = Worst Combination. But to protect your Child’s future you should opt for a No-Frill traditional child plan with no exposer to the stock market. Strictly avoid money back plans as they further reduce return on your investment.
Secondly invest in 5 star rated Equity Diversified Mutual Funds that can give you excellent returns in the long run.
While the management fees of Mutual funds are very low. Why not just invest in Mutual Funds rather than in Insurance Plans ? In my opinion, everybody should choose 4-star or 5-star rated Equity Diversified mutual funds but to cover losses in case of un-timely death of parents, one should go for a combination of insurance too. Why, because in the Child Insurance policy Sum Assured plus accrued bonuses up to maturity is payable on maturity even though parents death occurs during policy term.
SIP is the best way to start. Just remember to not forget to shift your corpus to Debt Mutual Funds just before 1-2 years of your goal, say your child’s 18th birthday.
And yeah, it is advisable to open a separate account for your child. What you can do is: you open a separate minor account for your child and save money in that account and do SIP via that account. If you have an account in your child’s name then you will be more emotionally attached towards it and save regularly in that account.
Financial Planning for a Child’s Education
Planning your child’s future is very important. And Education is the most important expense for your child. Here are the few things that you should keep in mind before planning your child’s education fund
1) Invest Early: This is very important. The compound interest is the greatest force in the universe. So if you start early then the compound interest will work in favor to make you rich. And you will be able to build large corpus … that’s just the law of the Universe.
2) Choose Growth Option: Choose 4-star or 5-star rated mutual funds and always go for Growth option.
3) Go For SIP: Rather than investing lump-sum amounts irregularly, it is advisable to invest small but regular amount of money.
4) Switch in Time: Just 1-2 years before your goal, you should shift your fund from Equities to debt. That’s because during the final years of your goal, your aim should be to protect the capital
THE COST OF EDUCATION IN FUTURE:
Always consider inflation rates while planning your financial goals. Remember education fees go up.
Two things are very important in planning your child’s financial future.
1) Start Investing Early &
2) Inflation Rate Consideration
If you can manage the above 2 factors, then you are a Winner