Why Buy A Child Plan Despite Little Savings

Hello and welcome to Fundoomoney, your 24X7 buddy for all your money matters! Life insurance companies offer child plans to save for the future expenses of children, especially higher education. A variant of the child plans is children’s unit linked insurance plans (Ulips).They use your premiums to provide life insurance coverage and help you buy units in a fund of your choice as you invest for the child’s future. A major attraction of Ulips is that they help you invest in equities and benefit from its growth over during the long Ulip term.

Despite availability of child plans and other investments, many parents, especially young parents, delay their investment effort for the future needs of their children. A common excuse provided is that they don’t save enough. Here, we will tell you why this costly mistake and what you should really be doing. But that’s coming up in just a little while.

Your regular savings will be never be “enough”
The right time to start investing for your child’s future is NOW. You will always have urgent needs and emergencies. You need to earmark a regular investment amount which will help you save the amount you think will be required when your child is ready for college or university. It is here that child plans come in handy, especially for those who struggle to establish an investment discipline, since you have an obligation of paying premiums regularly.

Start early with small investments 
It’s smart to start investing early in life even with small investments. Greater the time at hand, more you will be able to harness the power of compounding. This is more so if you are investing in equities through a child Ulip. For instance, if you save Rs 5,000 every month for 18 years and your money grows at 12% annually, you end up saving Rs 35.25 lakh.

Ensure regular investments
If you start investing for your child early and keep increasing your investments with increase in your income, results can be impressive. For instance, you start investing Rs 2,000 every month ion the child’s first year and your money grows at 12% annually. If you increase your monthly investment by Rs 2,000 after 3 years, and repeat the same hikes in year 6 and year 9, you monthly investment will rise to Rs 8000 in the beginning of the tenth year. By the time your child turns 18, you would have saved Rs 33.37 lakh.

We hope you found this useful.