Planning is necessary when you are out to achieve a larger than life goal. Higher education, as essential as it may be for your child’s future, is now larger than life goal. Even when rising at a meagre 2.5% a year, fees for the prestigious management degree from one of the best colleges will be around Rs. 1 crore 15 years from now.
Child education plans are designed specifically to help you meet this larger than life goal for your child. Here are five compelling reasons which make these plans a necessity today:
1. Rising Cost of Education
Inflation in education is a well-known fact. World’s best institutions have seen the rise in tuition fee up to 5% p.a. in recent years, which is slightly lower than the increase in the early years of the decade.
Child education plans like Invest 4G from Canara HSBC Oriental Bank of Commerce Life Insurance provides the option to invest in equity markets. Equity market returns are one of the safest options to beat inflation in the cost of your financial goal.
You can invest in equity with relative safety with a good child education plan. Invest-4G allows you to invest in an equity fund through systematic transfer and manage your overall portfolio. You can choose to rebalance your portfolio automatically as the market conditions change.
2. Uncertainty of Future Work Environment
Technological replacement of otherwise human roles is a worldwide trend today. The extent of these replacements, however, remains a mystery. One thing which is clear from the progress so far is that higher education only paves the way for additional learning needs.
For a stable career and consistent growth, future professionals will need to continually upgrade and learn new skills as professionals. The other line of careers that has spun up from increasing mechanisation is entrepreneurship.
Turning a small but high-demand concept into a profitable venture is the trade of the day. However, it can be financially taxing at least for the first few years of operations but nonetheless, rewarding.
You can plan for these uncertainties related to your child’s career with a good child insurance plan.
3. Safeguard against Uncertainties in Life
While the future profession is uncertain, life is no different. The biggest threat to the dreams of your child and family is your untimely demise. Fortunately, you can take care of their financial security with the help of insurance plans like the term insurance.
However, when it comes to the goals of your child, you can safeguard them separately. Child education plans have the option to continue investing in the intended goal even after your death.
For example, if your goal was to accumulate Rs. 50 lakhs in the next 20 years, with a child plan you can ensure that the money is available to the child even if you do not survive the term. The insurer continues to invest on your behalf as you would have done if you were alive until maturity.
Thus, using a child plan helps you ensure that your child receives the financial support to complete his/her education goal.
4. Avoid Borrowing for Education
Education loans may sound like a more logical solution for the higher-education goal due to its tax-saving benefits. Tax benefits or not, you still need to pay interest on the education loan. Also, given the uncertainty of employment and income after the education, your child may start the career with a huge liability.
If you have sufficient money in your pocket, even borrowing a little may be good if it benefits you. But that is math you should do when you arrive at the goal. Given the rising costs, you may need to borrow even after saving for the goal anyway. So, why not ensure that you can keep your borrowings low?
5. Promote Entrepreneurship
Raising capital is one of the greatest challenges for entrepreneurs today and it is unlikely to change in the future. Inventors and innovative young thinkers usually end up forfeiting a large part of their ownership stake in the business for additional funds.
Imagine if you can fuel your child’s entrepreneurial ambitions in the beginning. Their path to financial freedom would be shorter by that much. Plus, all of this can add to the family’s prosperity.
How to Start Investing in a Child Plan?
You can start investing in a child plan from the comfort of your home or office. Follow the steps below to start investing in your child’s future:
Allocating Your Premiums & Portfolio Management
While allocating your annual premium you can allocate between debt and equity funds as per your risk appetite and number of years to the goal. If your goal is more than 10 years away, and you are an aggressive investor, you can even go up to 100% in equity.
However, keep your equity exposure lower if your time to the goal is shorter. Simultaneously you can use automatic portfolio rebalancing strategies to control your risk as market situations change. The strategies work automatically as per defined parameters.
With Canara HSBC Oriental Bank of Commerce Life Insurance Company’s Invest 4G plan you can have the portfolio rebalancing strategy to automatically transfer all your equity fund units to a liquid fund. This will ensure that your returns from equity growth are safe as you approach the maturity of the plan. The plan also adds bonus units to your portfolio if you invest for long periods.
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