The main objective of all parents is to secure their child’s future through education expenses, marriage purposes, and financial independence. A child savings plan functions as the prime method to create a durable financial base for these goals. The selection process of appropriate plans demands a thorough evaluation of investments, protection against inflation, and the ability to make changes.
The following guidelines offer parents essential instructions for finding the most suitable child savings plan investments.
1. Start Early for Maximum Growth
The greater length of time your investment has to grow starts from the day you begin saving. The extended period you preserve your money gives time for compound interest power to multiply into a significant amount, which will help secure your child’s financial future.
💡Tips: The best approach to maximise the time and market growth benefits of your investments is to start right after your child’s birth.
2. Decide Whether to Invest in Traditional or Market-Linked Plans.
The market includes two main categories of child savings options.
Investors can access guaranteed returns through Endowment or Money-Back traditional plans while facing minimal risk levels, although the returns may be relatively low.
ULIPs operate via Market-Linked Plans and present an advantage of growth potential at the cost of market risks and various charges that may reduce early returns.
💡Tips: The traditional plan remains a suitable option for those who seek plan stability. Folks who take some market risks might discover better long-term returns through ULIPs, depending on market performance and fund choice.
3. Ensure Inflation-Proof Savings
Education expenses keep growing annually, so a plan that looks suitable now might become inadequate in the future. Look for insurance policies or investment plans that allow step-up contributions or provide market-linked growth to help combat inflation.
💡Tips: To prevent financial downturns, save accordingly by predicting upcoming education expenses while factoring in inflation rates that typically range between 8–10% annually.
4. Leverage Tax Benefits
Tax benefits are available in many child savings plans through Section 80C (for premiums paid) in addition to Section 10(10D) (for maturity benefits) of the Income Tax Act. However, some market-linked plans such as ULIPs with annual premiums above ₹2.5 lakh (issued after 1 February 2021) may not be eligible for exemption under Section 10(10D).
.💡 Tip: Before you select a plan to help you save, check the tax treatment so you can maximise the savings or returns.
5. Select Plans with Flexible Payouts
A good child savings plan should have flexible payout options to help you pay for different milestones in your child’s life, including the following:
✔ Lump Sum at Maturity – A single payout amount received when the child reaches adulthood.
✔ Regular Payouts – Periodic payments to cover educational expenses or other expenses.
✔ Premium Waiver Benefit – An optional benefit in many plans that ensures the plan continues even if the parent is not there to make the payments.
With a good plan in place, parents can feel confident that they have taken the financial stress out of saving for their child’s future. With the plan in place, starting early, choosing the appropriate investment type, considering inflation, and using tax benefits can help to create a strong financial protection structure for their children to accomplish their dreams and needs in the future.
Brandon is the cheif editor and writer at WorldUnfolds.com. With a passion for storytelling and a keen editorial eye, he crafts engaging content that captivates and enlightens readers worldwide.
