As education gets expensive by the year, worry mounts on the parents - Higher education cost is growing at a cost grossly higher than the average inflation rate applicable to a developing economy. Higher education has become a common norm in education field, funding the same could be challenging for parents.
How much to plan for?
This is an eternal dilemma, of course you weave dreams of your son/daughter becoming a doctor/engineer/entrepreneur/ sports person, but they may have their own dreams to pursue. Irrespective of what they choose to become, one thing in common is the cost involved.
For those of who started early investment have numerous options even within the gamut of `Low-risk` options. Some others would have missed the bus, but as they say it`s never too late to embark on this journey. Here is a snapshot of how one should arrive at the corpus required for your precious child`s needs.
Below table shows the corpus requirement for milestone to achieve for children.
How much to plan for?
This is an eternal dilemma, of course you weave dreams of your son/daughter becoming a doctor/engineer/entrepreneur/ sports person, but they may have their own dreams to pursue. Irrespective of what they choose to become, one thing in common is the cost involved.
For those of who started early investment have numerous options even within the gamut of `Low-risk` options. Some others would have missed the bus, but as they say it`s never too late to embark on this journey. Here is a snapshot of how one should arrive at the corpus required for your precious child`s needs.
Below table shows the corpus requirement for milestone to achieve for children.
Milestone | No. of Yrs hence | Amt as of today | Cost escalation rate | Projected Amt |
Graduation | 16 | 500,000 | 7.50% | 1,590,397 |
Post-Graduation | 20 | 800,000 | 7.50% | 3,398,281 |
Marriage | 22 | 500,000 | 6.50% | 1,998,303 |
Total Corpus Requirement | 6,986,981 | |||
Options:-Child Benefit Mutual FundsKey Features
> Gift Plan - It`s an investment of a longer duration varying between 5-18 years and has higher allocation to equities.
> Study Plan - It`s targeted at students who would require money in a shorter duration of 3-5 years, and thus invest large part in debt instruments.
> Exclusively designed to payout out sizable chunks of amount.
> Some funds have lock-in of three years or more.
> These are essentially hybrid funds with a decent % exposed only into debt instruments.
Traditional / Guaranteed Child Plan
Key Features
> Money Back - Payouts are at relevant milestones of child.
> Endowment - One -time payout.
> Guaranteed Plan - Stipulated amount is already guaranteed - No surprises!
> Bonus Linked Plan - Depending on company`s performance, bonus will be declared.
ULIP Child Plan
Key Features
> Offers ample flexibility of withdrawal as per requirement, one can also stop premium payments after the minimum period.
> Can use mix of debt - Equity within the same plan to build the corpus.
> Can choose both premium & sum assured as required - unlike traditional plan where you are required to pay a certain premium on the sum assured chosen by you.
Key points to note:Whilst choosing Insurance
> The cover should be on the parent - some offer life cover on child, avoid such plans.
> Assess whether plan has WoP (Waiver of Premium) benefit - on the eventuality of the proposer the future premiums are waived off and the policy will continue to offer payouts as pre-determined.
> Traditional plans are best suitable for child`s age between 0-5 year, post this the no. of years available to build the corpus becomes less and hence, traditional insurance may tend to become ineffective. In that case, ULIPs can be a better option.
> Children insurances are tax deductible up to Rs 1 lakh, under section 80 C, hence, you can end up taking care of your tax planning and children needs as well.
Whilst choosing Child benefit Mutual Funds
> An ideal time-frame to include mutual funds within your portfolio to build corpus is 3-5 years which is essentially short-medium term.
> Some of them have a lock-in till the child attains 18 years of age or at least a 3 year lock-in.
>Falls within the moderate risk profile, there is a considerable amount parked in debt
> No tax benefit can be availed.
Hope this note enables you to make the right choice for securing the future of your child and their dreams!
> Gift Plan - It`s an investment of a longer duration varying between 5-18 years and has higher allocation to equities.
> Study Plan - It`s targeted at students who would require money in a shorter duration of 3-5 years, and thus invest large part in debt instruments.
> Exclusively designed to payout out sizable chunks of amount.
> Some funds have lock-in of three years or more.
> These are essentially hybrid funds with a decent % exposed only into debt instruments.
Traditional / Guaranteed Child Plan
Key Features
> Money Back - Payouts are at relevant milestones of child.
> Endowment - One -time payout.
> Guaranteed Plan - Stipulated amount is already guaranteed - No surprises!
> Bonus Linked Plan - Depending on company`s performance, bonus will be declared.
ULIP Child Plan
Key Features
> Offers ample flexibility of withdrawal as per requirement, one can also stop premium payments after the minimum period.
> Can use mix of debt - Equity within the same plan to build the corpus.
> Can choose both premium & sum assured as required - unlike traditional plan where you are required to pay a certain premium on the sum assured chosen by you.
Key points to note:Whilst choosing Insurance
> The cover should be on the parent - some offer life cover on child, avoid such plans.
> Assess whether plan has WoP (Waiver of Premium) benefit - on the eventuality of the proposer the future premiums are waived off and the policy will continue to offer payouts as pre-determined.
> Traditional plans are best suitable for child`s age between 0-5 year, post this the no. of years available to build the corpus becomes less and hence, traditional insurance may tend to become ineffective. In that case, ULIPs can be a better option.
> Children insurances are tax deductible up to Rs 1 lakh, under section 80 C, hence, you can end up taking care of your tax planning and children needs as well.
Whilst choosing Child benefit Mutual Funds
> An ideal time-frame to include mutual funds within your portfolio to build corpus is 3-5 years which is essentially short-medium term.
> Some of them have a lock-in till the child attains 18 years of age or at least a 3 year lock-in.
>Falls within the moderate risk profile, there is a considerable amount parked in debt
> No tax benefit can be availed.
Hope this note enables you to make the right choice for securing the future of your child and their dreams!
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