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Saving Plans & Schemes to Give Children a Debt-free College Education

dateKnowledge Centre Team dateSeptember 06, 2021 views234 Views
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Planning for your child's education is one of the key components of financial planning. Every mother acts selflessly to give the best to her child under her capacity. Good education is one such thing. When you plan for your child's education corpus, you cannot afford to miss inflation in your calculation. Inflation for education is highest in the country.

If your child is a toddler, you may not know what your child will study - complex chemistry molecules or economic theories. As a mother, it may be difficult for you to determine the amount you may need. However, you have to assume some course for your child and plan accordingly. The earlier you start, the easier it is. If you start early, you can create an educational corpus for your child, even with a small investment. When you give time to your investment, compounding works like magic on your investment.

Five Investments for the your Child’s Higher Education

When you plan for your child's education, you need to look for saving plans that have a maturity date in line with the year you will need the funds. Below are the five best savings plans you can explore for your child's education.

1. Moneyback Plan

Planning for a child's education is not only about the cost of college fees. The education cost starts well before that. You will have to invest in his coaching classes at different stages and then for the graduation fee.

With a Moneyback plan, you get payouts at regular intervals and a lumpsum amount at maturity. In case of an unfortunate event, you get a sum assured that acts as a plan B for you. This way, the Moneyback Advantage plan secures the future of your child from all sides.

When you buy the plan, you have to pay a premium for ten years. You receive the payouts at the end of the 5th, 9th, and 13th years. You can use these payouts to meet different expenses related to the education of your child. At maturity, you will receive the sum assured that you can use to pay college fees.

The premium amount will depend on your age and the sum assured you want. You also get tax benefits on the premium you pay for this plan.

2. Guaranteed Savings Plans

Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Savings Plan (Premium Protection Option) is another plan that works perfectly to create an educational corpus for your child. Based on the amount you may need and the year you will need it, you can decide the policy premium and policy tenure. If you die during the policy tenure, the beneficiary receives the sum assured, and all future premiums are waived off. The plan protects the dream you have seen for your child under all life conditions.

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For example, if your child is three years old now and as per your calculation, you will need Rs 12 lakhs for his coaching when he turns 18. You can select policy tenure as 15 years and pay Rs 1 lakh for the next seven years under this plan. At maturity, you will receive Rs 11,88,127 in line with your goal.

The minimum annual instalment for this plan is Rs 20,000. In case of any contingent needs, you can also avail loan facility. You will also get tax benefits on the amount paid towards the premium under Section 80C.

3. Invest 4G ULIP

Under this plan, you get life coverage that ensures your child receives the best education even in the worst-case scenario. The Care option under Invest 4G plan is best suited for mothers looking to secure their child's future. The minimum premium with which you can invest in this plan is Rs 60,000 per year. The sum assured is 10X of your annual premium. At maturity (15 years), you will receive the maturity benefit which you can use for your child's education.

The plan also gives you loyalty addition and wealth boosters benefits at the end of the 5th, 10th, and 15th years to boost your investment. You may need funds at different stages. The plan gives you the option of Systematic Withdrawal to meet all the educational needs of your child.

4. Public Provident Fund (PPF)

Public Provident Fund is another investment option you can explore as a mother for your child's education. The PPF comes with a minimum tenure of 15 years. If it is in line with the requirement, you can opt for this saving plan. The rate of interest varies under this plan. At present (July 2021), the rate of interest is 7.1%.

You have the facility of partial withdrawal in the 7th year, in case you need funds before the tenure completion. You can start investing in a PPF account with as little as Rs 500.

5. Sukanya Samriddhi Yojana

This saving plan is specifically for a girl child. You can deposit a minimum of Rs 1000 and a maximum of Rs 1.5 lakh per year in this savings plan. The policy duration is 21 years. You will have to deposit money only for the first 15 years. You get higher interest under this compared to other similar saving plans. The amount invested is eligible for tax deductions. Although policy tenure is for 21 years, you can withdraw partial funds, up to 50%, once your girl child turns 18 years of age.

Learn more about Sukanya Samriddhi Yojana.

Some life goals cannot be compromised or delayed. Your child's education is one such goal. Therefore, you should always have a separate plan for your child's education and not mix it with other investments. Best saving plans for children ensure they get the best future in all life situations.

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