Your little whiz kids must be having certain dreams in their lives, such as becoming a lawyer, choreographer, actor, or athlete. Unquestionably, such high-flying goals require a great deal of effort, lots of dedication, commitment and above all, adequacy of funds at the right time.
It can’t be negated that cut-throat competition and inflation together have posed a tough challenge in child’s education as well.
Now, the question is, ‘how do you build enough corpus for the long-term education goals of your child?’
This is where the SMART approach comes into play. Follow the SMART money mantras to build a safe future for your child.
What are S.M.A.R.T. Money Mantras?
SMART money mantras refer to a series of steps that will help you automate wealth building. You can turn your income into savings, savings into investment and investments into wealth using the SMART model of goal planning.
SMART is an acronym for
- Start Early
- Monitor Regularly
- Always Save
- Reap benefits
- Tax savings
Significance of SMART Money Mantras
The SMART approach introduces you to these fundamental ‘golden rules of financial management. It motivates you to start saving now so that you get more time for your money to grow at a compounding rate. Eventually, you will attain ultimate financial independence to fulfil your goals.
Here are the 5 SMART Money Mantras of financial planning, explained in detail:
I. Start Early
As a prudent investor, you must start saving as soon as possible. If you start saving today, you will get more time for your savings corpus to expand at a compounding rate. No matter in how many financial traps you may fall, such as unemployment, or the most recent case of a lockdown, you can be confident enough about their finances. Always remember, today’s saving is your future’s earning.
II. Monitor Regularly
Although no one wants to be too involved in their money matters, yet it’s essential to monitor the growth of your savings at regular intervals. Tracking your income growth in line with your current expenses is the second most important step towards ideal financial planning.
However, with plans like child insurance ULIPs, you can automate monitoring. These plans offer automatic portfolio strategies to help you manage your investment according to market performance.
So, your money continues to work in your favour even when you are not looking.
III. Always Save
An early habit of saving gradually builds financial independence in life. While choosing the ideal child’s savings plan, you must also know the appropriate proportion of savings. For this, you can go with a 50:30:20 budgeting ratio:
a) 50% of your income can be for your unavoidable life necessities such as home expenses.b) 30% of your income you should save for your long-term goals such as child’s education, marriage etc.c) 20% of your income should be invested for meeting lifestyle needs such as going out on vacation.
Following this ratio in your monthly budget will allow you to maximize your savings. Regular savings is important if you want to achieve bigger financial goals in life.
IV. Reap Benefits
Your investment plan has to offer the maturity benefits as per your goals. For example, if your goal requires annual money for fees and expenses, the plan should offer the same without affecting your portfolio.
Few ULIPs offer systematic withdrawal options after the lock-in period. Money-back plans return the invested money every few years with maturity value coming back with the bonuses. Thus, these plans can help you fulfil regular or annual financial needs.
V. Tax Savings
Taxes are the second biggest impediment to the growth of your investment. If you can manage taxes well, you can save huge money out of your earnings from the invested money. Often, investments like child insurance plan allow tax-saving out of your income as well as maturity value.
For instance, you can avail of the deduction on bonus amount at the policy-end under section 10(10d) of Income Tax Act, in addition to the 80c deduction in your child insurance plan.
Buy Child Insurance Plan for SMART Investment
A child insurance plan is one of the best saving plans for your child’s important milestones in life. A good child plan will ensure that your savings and efforts bear fruits and support your child’s ambitions financially as per your plan.
Here are the important benefits and features of a child insurance plan which also support the SMART approach:
I. Premium Protection Option
A good child’s future plan has a unique feature called the Premium Protection option.
Canara HSBC Life Insurance Guaranteed Savings Plan comes with this feature.
In case of your untimely demise:
- The insurance company shall give your family the guaranteed death benefit; and
- Will pay all your outstanding premiums till the policy end.
- At policy maturation, your family shall also get the maturity value.
So, while you need to invest regularly as per policy rules while you are alive, the policy investment continues even after your death. This way, your child education plan will continue till the end.
II. Partial Withdrawal Options
Child ULIPs offer the option of partial withdrawal from the policy after the lock-in period. Other plans have their unique features to allow you to use the corpus before maturity:
- Endowment Child Education plans offer you the option to systematically withdraw certain amounts from your policy in the last policy years.
- With the Canara HSBC Life Insurance Money Back Advantage Plan, you will receive regular pay-outs at the rate of 15% of the assured amount during the 5th, 9th &13th year-end of your policy term. Finally, you will receive a guaranteed sum equals to 55% of your sum assured along with the accrued bonuses.
- In a ULIP Child plan, you can simply go for partial withdrawal from the accrued investment corpus, after completing 5 years of the policy term.
This way, a child plan allows you to “reap benefits” as per your own preferred method.
III. Automatic Portfolio Management
This is unique that comes in a ULIP Child plan. Here, you can choose your ideal portfolio ratio among the equity, debt, mutual funds and hybrid-fund avenues. Moreover, you can realign your portfolio using the unique auto-rebalancing strategy. This way, you will be able to use all the market speculations to your utmost financial gains. No doubt, you will be able to “monitor your growth regularly” in a very easy way.
Keeping the 5 golden money mantras of financial planning, you can build adequate wealth to support your child’s dreams. Child plans are a perfect tool to accomplish this easily.