Skip to main content

How To Save Smartly For Your Child’s Future

A comparison of unit-linked child plans and mutual funds

Insurance child plans

After the new unit-linked insurance plan (Ulip) guidelines by the Insurance Regulatory and Development Authority, insurers have been quick to launch products in this segment. While Aviva launched Young Scholar Advantage, HDFC Life started marketing its YoungStar Super II and YoungStar Super Premium.

How do these work: In child plans, if the parent (policyholder) passes away, the insurer pays the premium so that the child receives the targeted corpus on maturity. There is more flexibility in the new schemes. For example, Aviva Life Insurance offers riders such as increasing the cover, accident and disability benefit, and a rider that allows regular income to a child in case of a parent's death. HDFC Life has introduced options, wherein an individual can opt for an annual payment to a child equivalent to the annual premium (without a rider), if the parent passes away before the policy matures. Earlier, there were only one or two riders.

Why invest: The structure of Ulips disciplines an investor, as there needs to be an annual payment of premium. Also, there is a five-year lock-in.

Drawback: Investing through Ulips is still expensive, even after the new guidelines. If an insurance company is paying the premium on behalf of the policyholder in case of his/her death, the cost of such a feature is built into the product. Typically, this charge is built into the mortality charges that the company deducts from the premium.

Mutual fund child plans

Many mutual fund houses such as UTI Mutual Fund, Tata Mutual Fund and Franklin Templeton Asset Management have these schemes for over a decade.

There are impressive add-ons, as well. Some funds accept the application only in the name of a child. It is done to deter parents from utilising the money for other purposes. They also offer an option whereby a parent can lock-in the investments, which cannot be redeemed until the child attains the age of 18 years.

Composition: These schemes are structured, either as balanced funds or monthly income plans, which are low on equity. However, asset allocation between equity and debt differs from fund to fund. For example, UTI CCP Advantage, a balanced fund, has the mandate to invest up to 100 per cent in equity, and 35 per cent in debt.

Tata Young Citizens can invest a maximum of 50 per cent in equity and 50 per cent in debt.

Some schemes also offer a personal accident insurance cover. These include ICICI Prudential and Tata Mutual Fund. ICICI Prudential covers one parent for `5lakh or 10 times the units held, whichever is lower. Tata Mutual Fund covers a child from personal accident for `1.5 lakh.

Why invest: Mutual funds are low-cost products.

Drawback: These funds follow asset allocation. Higher debt allocation restricts the returns. The personal accident insurance too has caveats, and one needs to understand the terms and conditions.

Own plan

While doing it on your own, the flexibility is maximum. But there are pitfalls as well, including alack of discipline, that may creep in.

THe tenure of the goal is 15 years. A monthly saving of `4,500 in an equity-diversified mutual fund at 12 per cent returns annually can help him create the desired corpus. A term plan with a cover of `20 lakh would cost him 3,000 a year.

Why invest: Planning on your own can help you reduce costs associated with investments. You have the control over asset allocation and choice of products.

Drawback: If you set out on your own, you will need to monitor your investments regularly. In addition, market conditions can influence your investment decisions.

Popular posts from this blog

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax...

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

Investment Strategy - What is Sector Rotation Theory?

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   The economy goes through cycles : it expands for a few years and then contracts. Study of historical data suggests that different sectors tend to perform well on the stock markets during different stages of the economic cycle. While history never repeats itself exactly, some broad patterns tend to recur. Investors can take advantage of the sector rotation theory to move their money from those sectors that have seen their best times to those that are likely to do well in future.   The person who developed the sector rotation theory is Sam Stovall, chief investment strategist at Standard & Poor's. He developed this theory by studying data on economic cycles going as far back as 1854 provided by the National Bureau of Economic Research ( NBER ) of the US.   When trying to correlate stock-market perfor...

SBI Long Term Advantage Fund Series

Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. ICICI Prudential Long Term Equity Fund 5. Birla Sun Life Tax Relief 96 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Birla Sun Life Tax Plan Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave your comment with mail ID and we will answer them OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300  
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now