Finance

5 Key Features to Consider When Choosing a Child Savings Plan

Saving for your child’s future is obviously a major priority in your working years. Hence, child saving plans come in handy for this purpose, enabling you to accumulate sufficient funds to meet the future requirements of your little one, be it higher education, weddings, or even other expenses. But how do you select the right plan for yourself? Here’s what you need to keep in mind. 

Things to Check While Choosing Child Savings Plans

Here are the key aspects worth noting while selecting child savings plans. 

  • Plan Tenure and What You Expect- You should start investing after the birth of your child. An early start will help you benefit more from the power of compounding. You should look for a plan that will give you good returns and ensure the necessary funds are available at the right time. Hence, check the plan tenure carefully. It should be convenient enough to give your child the required funds at the right juncture in life. Also, check the approximate returns to see what you can expect. 
  • Premium Waiver Features- A majority of child savings plans usually come with what we know as premium waiver benefits. These may be optional or integrated into the policy itself. It is helpful since it will protect your child from paying future premiums in case of your demise within the policy tenure. The insurance company will then pay the remainder, and the policy will stay active with all benefits kept intact. 
  • What is Your Risk Appetite- Understand your risk appetite or tolerance levels before you invest. If you have a higher risk appetite and want to grow a sizable fund for your child, then you can consider deploying your money in equities. ULIPs or unit-linked child plans with tenures of 10-15 years may be good options in this case. In an ideal scenario, this should be balanced with a mix of hybrid and debt funds for lowering risks. System transfer options should be available to safeguard your gains from investments in this scenario.  If you have a lower risk appetite, consider endowment plans. These offer life coverage like ULIPs while ensuring guaranteed returns simultaneously. The returns will be comparatively lower, while you should also examine the bonuses that you stand to gain throughout the policy period. Check whether it is a compound/simple reversionary bonus, and if there are cash bonuses, examine them to finalize the necessary options. 
  • Life Coverage Amount- Check the life coverage amount offered in the policy. It should be high enough to cover the requirements of your child in case of your unfortunate demise within the plan period. 
  • Reputation of the Insurer- Do not neglect the insurer’s reputation and overall standing in the industry. Go with a trusted company that has a good claim settlement ratio and easy application and claims procedures. 

Summing up, check these aspects with care before selecting child savings plans. A little effort on your part will be immensely helpful in the long run. 

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