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How to Plan for the Best Higher Education for your Child?

dateKnowledge Centre Team dateMay 28, 2021 views322 Views
Child Education Plan | Child Savings Plan | Child Insurance Plan

The best jobs go to the most qualified people. This liner means much more in today’s hypercompetitive world that has millions of well-qualified people entering the workforce each year. To remain ahead, candidates constantly upgrade themselves with better skills, the latest qualifications, and training programs. With increasing awareness about the importance of education, this number is only set to increase over the decades. And getting quality education means investing money. Either people buy child insurance plans or they opt for education loans.

An undergraduate degree may no longer suffice to demonstrate deep expertise in the chosen field. Industry practitioners are going one step ahead of a master’s degree and opting for the intensive PhD program. As a parent, you must draw a child education plan to support him/her until s/he attains a post-graduate degree at a University of repute.

Child Education Plan | Child Savings Plan | Child Insurance Plan

Higher education has to be planned more meticulously because this is the stage at which your child will opt for super-specialization and this will define his core niche/expertise. Following some of these broad guidelines could help you make a wise choice.

1. Look for the Right Courses

Your son/daughter wants to study MTech in Avionics. You will have to look at Universities/Engineering Colleges offering this specialization. If it is not available in your city, is your son/daughter willing to relocate to that particular city for 2 years? What are the additional costs of living there? If the course is undecided, you must explore online, visit Education Fairs and Admission Seminars to get a gist of what is offered.

2. Look for the Right Institutions

Rankings, albeit not a perfect yardstick, do give a fair idea to shortlist colleges and Universities. Different agencies assess colleges and Universities on different parameters such as teaching, R & D, infrastructure, campus placements, class size, Net Promoter Scores (NPS), etc.

Institutions that figure in one list may not figure in another because each list has its focus area (public universities, deemed universities, technical colleges, B-Schools, etc) and also based on the college’s interest to disclose details and participate. NAAC, NIRF are some of the government-backed ratings in India.

The quality of the institution signals brilliance creates a positive perception and increases acceptance. This opens many doors more quickly for the candidate. In healthcare, the doctor’s alma mater gives the initial confidence to trust his/her ability to deal with human life. After all, would you like to risk your life in the hands of a doctor who graduated from an unknown college on a remote island?

Here’s everything you should know about a child insurance plan.

3. Calculate Fees and Other Expenses

Fees vary basis the course, the institution, and the location. For example, the cost of living in New Delhi will be higher than that in Nashik. An MTech in Computer Science could be costlier than an MTech in Engineering Management. Plan to the best extent possible and also factor in your budget. Bank loans are possible only when you provide collateral of almost 140% of the value of the loan. Moreover, there is an upper cap on the amount you can avail of.

4. Define your Goal

Goals should not be generic especially when finances are involved. Makes sure you chart out a goal that is Specific, Measurable, Attainable, Realistic, and Time-Bound (SMART)

a. Specific

Being specific with the education goal would mean you can define the discipline of the study and possibly the location as well. The cost of your goal in the next step may vary accordingly:

  • Engineering, Medical, Administration,
  • Type of Institution, for example, government-backed, private, etc.
  • Top Indian institutions or foreign
  • If foreign which country

b. Measurable

Once you have defined the goal specifically, your area of search for a number becomes narrow. For example, The current cost of such programs (MTech, MS, MBA) is in the range of Rs.15 Lakhs to Rs. 35 Lakhs in India. For a top foreign institution, it could go up to Rs. 40 – 50 lakhs in current cost.

In 15 years, factoring in inflation, these courses would cost in the range of Rs. 30 Lakhs to Rs. 70 Lakhs. You can work backwards to save or invest to reach this figure.

c. Attainable

Your child wants to study MBA at a top private American University. S/he has great grades in school and will surely (all prep tests are indicating this) ace the GMAT. The chances of securing admission seem very much plausible.

d. Realistic

Realistic is rather simple to understand. For example, you should not expect your child to become a spaceship pilot with a degree in liberal arts. So, realistic would mean your goal has to be aligned with your child’s acumen and ambitions.

e. Time-Bound

You must invest and realize your financial goal within 10 years. Your child needs the money then, not afterwards. So, investments have to be laser-focused.

5. Select the Right Child Plans for Investment

Defining your financial goal the SMART way gives you a clear picture of how much you need and when. Thus, you can start saving accordingly. The investment options, however, will depend on your risk appetite:

  • Aggressive Investment Options
  • Safe Investment Options
  • Guaranteed Investment Options

Child Insurance Plans for Aggressive Investors

Invest 4G and Smart Junior Plan, offered by Canara HSBC Oriental Bank of Commerce Life Insurance, are some of the most flexible and efficient investment options for aggressively growing your money. These plans allow you to invest in a mix of equity and debt instruments so that you can take advantage of market movements and benefit from equity growth.

The plans have many features to help you benefit from the market growth, even when you are not following the markets continuously:

  • The auto funds rebalancing feature moves your money across various funds, every quarter, as per your defined allocations.
  • The policy also allows partial, systematic, and milestone-based withdrawals to meet any unexpected expenses and have a systematic flow of income to pay fees, etc.
  • Wealth boosters and other bonus for long-term investors for better portfolio growth
  • Protect your goal with the premium protection option, where the insurer will pay the remaining premiums on your behalf in the case of your early demise.
  • The staggered pay out schedule in the last four years of the plan, so that money is available when your child needs it.

Child Insurance Plans for Safe Investors

You may want to safeguard your goal, not only from the uncertainties of life but also from the uncertainties of financial markets. You can invest in any of the following:

  • Debt fund options in Invest 4G or Smart Junior ULIP plans
  • Guaranteed Savings Plan

Guaranteed Savings Plan, offer guaranteed maturity value. So, you can be sure to receive a specific sum of money at maturity when you start the plan. While the debt fund option of ULIP plans may not guarantee a rate of return, it does offer stable growth to your portfolio. Debt funds are far more stable than equity funds and will offer steady growth to your invested money.

Investment in insurance policies gives you the comprehensive benefit of investment, insurance cover, and tax deduction. The life cover assures you that your family will still educate the child, as planned, if, unfortunately, you are not around then.

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Frequently Asked Questions (FAQs) for Child Insurance

Any parent with a child between 0-15 years should opt for a child insurance plan. It helps you deliver inflation-beating returns for the various needs of the child while he/she grows up. As a child grows up, his/her financial needs increase substantially.

The importance of a good education cannot be overstated. Without quality education, a child may not reach his/her full potential. But the rising cost of education can become an impediment in higher education. A child education plan ensures that you do not have to worry about the money for your child’s education. It is a mix of insurance and investment. A part of child education plan is used to provide the financial security of insurance, while the balance is invested in market-linked instruments. The investible portion delivers decent returns in the long run, helping you accumulate a corpus for your child’s education.

Child plans are tailor-made financial products designed to secure children’s future. Typically, child plans have two components—insurance and investment. The insurance component protects the child in case of the parent’s demise, while the investment helps in accumulating a corpus for the child’s needs such as education and marriage. Child plans have several features that are primarily aimed at financially securing children. Some of the features are:

  • Maturity benefit
  • Premium funding option
  • Partial withdrawals
  • Milestone payments
  • Various investment funds
  • Protection of returns

The right time to buy child plans depends on the financial goal and the type of policy. Child insurance policies are long-term instruments and to generate decent returns it is advisable to invest as early as possible. You can invest in child insurance policies even before the child is born. Child education policies are relatively short-term policies. Child education policies can be chosen according to the financial goal. You can invest in child education policy as soon as the child is born if you plan to fund his/her primary and secondary education through the policy. If the aim is to accumulate funds for the higher education of the child, then you can invest at a later stage. In any case, it is not advisable to invest after the child has turned 15.

Child plans are meant to build a financial buffer for your child’s future needs, so, it is important to have a fail-proof plan. A few things to consider while buying child plans are:

  • Goal: It is pertinent to have a clear goal in mind as it determines the type and tenure of the policy. You should invest in a child plan as soon as the child is born. Starting early gives your investment to grow and helps you prepare better for your child’s needs. Similarly, selecting a long-term policy protects your child for a longer-term.
  • Premium waiver: While buying a child plan, it is mandatory to check if the premium waiver facility is available or not. Not having a premium waiver option can leave your child vulnerable in your absence.
  • Inflation: When you are investing for the long term, external factors like inflation cannot be ignored. Invest in ULIPs to generate inflation-beating returns. Invest 4G plan offers customers an option to choose from seven different funds with varying degrees of exposure to equity.
  • Bonus component: Along with the basic benefits of a child plan, insurance companies also offer additional benefits. Even though these benefits are small, they could add value considerably in the long run. For instance, Invest 4G plan provides benefits such as wealth boosters, loyalty additions and return of mortality charges.

The eligibility to open a child education plan is similar to a child insurance plan. The entry age is generally between 18 and 65 years. The maturity age is between 23 years and 80 years. You can start investing in a child education plan with Rs 5,000 per month or Rs 50,000 per year. The policy tenure varies between 5 years and 30 years.

There is no universal minimum instalment for a child education plan. Every insurer has its own minimum limit, even different plans have a different minimum limit. Invest 4G plan has a minimum limit of Rs 5000 if you choose to pay monthly premiums. The minimum premiums for quarterly and half-yearly payment tenures are Rs 15,000 and RS 30,000, respectively. In the annual mode, the minimum premium is Rs 50,000.

Child education plan can either be unit-linked or non-linked. The interest rate of ULIPs is determined by the fund chosen by the policyholder and the performance of the market. The interest rate for non-linked child education plan is decided by the insurance company.

The policy for premature closure of child education plan deposit differs from insurer to insurer. Some insurers allow premature closure of child education plan deposit. If the account is closed before the lock-in period expires, the fund’s value minus the surrender charges id deposited in the discontinued policy fund. The amount earns a minimum of 4% interest and will be paid to you after the lock-in period gets over. It the policy is surrendered after the lock-in period, the total fund value minus the surrender charges will be given to you. But premature closure of child education plan can be fraught with risks and you may not achieve the stated aim. Invest 4G plan allows you partial withdrawals without surrendering the policy, which essentially disincentivises premature closure of the policy.

Child education plans come with flexible payout options. You can either set up a standing instruction for instalment payment when you buy the policy or inform the insurance company during the policy tenure. Insurance companies generally accept requests for instalment payment a few months before the maturity.

One of the defining features of child education policies is the partial withdrawal facility. Most insurance companies allow partial withdrawal from child education plans to take care of liquidity needs. Invest 4G plan allows partial withdrawal after the 5th policy year.

You can avail a secured loan against a child education plan. The loan can be used to fund the higher education of the child.

Child education plans are like child insurance plans with some slight differences. Child education plans have relatively shorter tenures than child insurance plans. Child education plans have milestone payments coinciding with the educational stages of the child. These plans have a limited scope and are not dynamic products like child insurance plans.

When you buy life insurance, the insurance company asks for the nominee details. Only the person named as the nominee in the policy can cash out a life insurance policy in case of death of life insured.

Child education plan not just secures the financial future of the child but also provides tax benefits to the policyholder. The premiums paid for child education plan are eligible for tax deduction under Section 80C of the Income Tax Act. The maturity amount is also tax-exempt under Section 10(10D) of the income tax law.

While there are several child plans in the market, the Invest 4G plan is the best of the lot. Invest 4G with its unique proposition provides all-round protection to your child. With the online ULIP plan , you can decide the premium payment tenure and also the settlement option.

You can invest in a number of financial products for your child’s education. If you need a long-term savings instrument, the PPF is an eligible option. But if the child’s education is the sole aim of your investment, nothing is better than a market-linked scheme. Market-linked investments, especially equity investments tend to perform better in the long run. Investment in market-linked schemes can ensure handsome returns on your savings by the time your child grows up. Opt for Invest 4G plan to give your child a secure educational future.

Getting insurance required a visit to the bank or the insurer’s branch earlier. But with the popularity of online ULIP plans, getting an insurance plan has become extremely easy. You can buy a host of insurance products directly from www.canarahsbclife.com and get discounts on the premium from the company.

While the cost of insurance depends on a host of factors such as tenure, coverage and the mode of payment. With Invest 4G plan, you can start investing for the financial future of your child with just Rs 5,000 every month. However, if you are not clear about the cost of insurance for your child, you can use the ‘life insurance calculator’ in the ‘tools and calculator’ section of www.canarahsbclife.com. Similarly, you can use the ‘child education planning calculator’ to get an idea of the cost of child education plans.

Considering the flexibility in the premium payment tenure and the payout settlement, Invest 4G is the best scheme for the child. The Invest 4G plan also provides the premium funding option which ensures the financial stability of the child even in the absence of the policyholder.

To choose the ideal child insurance plan, you will have to start with planning the various stages of the plan and your child-specific milestone payments.

  • Paying capability: Just investing in a child insurance plan is not enough, you will have to pay the premiums regularly and timely to keep the policy active. Make a correct estimate of your paying capability and decide the premium payment frequency.
  • External factors: While buying a child insurance plan, consider the external factors such as inflation and interest rates before finalising the maturity benefit.
  • Premium waiver: The premium funding facility is a crucial feature for the success of the child insurance plan. Not having the premium waiver facility can leave a costly chink in your child insurance armour.

To choose the ideal child insurance plan, you will have to start with planning the various stages of the plan and your child-specific milestone payments.

Having life insurance has become a necessity and the earlier you buy one the better. Life insurance plans are cheaper when you are young. Moreover, when you are buying products such as ULIPs that have an investment component, having a long policy tenure helps in compounding your savings.

Most insurance companies have started offering online policies. You can either pay through offline mediums or opt for online ULIP plans. Buying insurance policies online is cheaper and hassle-free. The premiums can easily be paid through the website or mobile app.

There are three major rider benefits provided with child insurance plans.

  • Premium waiver benefit
  • Accidental death and disability cover
  • Critical illness cover
  • The frequency of the payout is decided by the policyholder while buying the insurance plan. Even if you fail to define the frequency of the payout while buying the policy, it can easily be rectified during the policy term.

    You can appoint a minor as nominee for your plan, but you will have to nominate an appointee who will have to give his/her consent to act as an appointee. The appointee will cease to hold power once the minor nominees become majors. In the event of a claim, of your nominee is minor and you did not name an appointee, the proceeds will go to the legal heirs.

    No child should give up on his/her dreams to study in premier institutes like IIT and IIM due to financial constraints. With the rising cost of higher education, investing in a child plan has become extremely important. Child plans help you save in a disciplined way for a secure financial future of your child.

    Canara HSBC Oriental Bank of Commerce offers a plethora of child plans to take care of varied needs. With unique features such as fund switching, premium redirection, change in sum assured and return of mortality charges, child plans from Canara HSBC provide unprecedented coverage.

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