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Education is the only way to ensure your child a bright future. Quality education costs money .This is where you need to invest in child education plans such as children's endowment plan or a child Ulip plan.
You also get tax benefits when you invest in child education plans.
Planning for your child's education begins when your child is very young. This gives you the best chance to collect money for his/her marriage or education.
You need to provide quality education for your child. Education being expensive, children education planning is a must.
Marriage today costs lakhs of rupees. Children Education Planning, helps you to save for this expense.
You must avail waiver of premium rider to ensure your child gets a good education, even if you are not around.
You get tax deductions on the premium you pay for the child plan. The amount you get on maturity of the plan is tax free.
This is a twin benefit plan giving you :
Insurance + Savings
You (The parent) of the child are the proposer of the child endowment plan. The proposer is also the life assured in the policy. The policy is taken on the life of the proposer (parent) in a child endowment plan. The proposer pays the premiums of the child endowment policy.
If the proposer/parent dies the child gets the money for his education. Higher is the premium, higher is the sum assured you can take in a child endowment plan. When the child endowment plan matures, you get a lump sum (Sum assured + bonus) which you use for your children's education.
The child endowment policy matures when your child is 18-21 years of age.
The waiver of premium is a rider benefit in a child endowment plan. A rider is an additional benefit you obtain by paying an additional/higher premium.
You pay the premiums in the child endowment plan until the maturity of the plan or for a fixed period. When the child endowment plan matures you get.
Sum assured + bonus
If you/proposer of the plan, die before the maturity of the plan, your child (or the guardian) immediately gets the sum assured. All future premium payments are immediately waived off (No further premium payments need to be made).
The Insurer takes care of the premium payments (Pays them on your behalf).On maturity of the plan (When your child is 18-21 years) a second payout is made. Your child gets the maturity amount. This is a lump sum paid on the maturity of the policy.
Payment made on the death of the proposer
Payment made on the maturity of the plan.
When you avail a child endowment plan make sure that you take a waiver of premium rider in your plan. The money you get from this plan can not only help you to meet your children's education expenses, but also help in their marriage.
Your child can get the money not only on the death of the proposer, but also on the disability (if the proposer is severely disabled and not able to work).
You can avail a child endowment policy when your child is as old as 1 day. The earlier you avail the plan greater are its benefits and earlier would be the maturity of the plan.
So make sure you avail a child endowment plan with a waiver of premium rider for your child.
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Children's education planning is an important responsibility of parents and calls for proper financial planning. Parents nowadays want the best education for their children. Education abroad as well as in India is very expensive. Planning in advance is very important as it concerns children's future and this is where children's education planning is very essential.
Children's education planning involves making a decision on the career growth of a child well in advance. The decision process involves planning the cost of education fees at current rates and then keeping the inflation factor of college fees in mind. Food and accommodation expenses need to be planned in sync with college education.
SIP (Systematic Investment Plans): A popular method followed today is the use of a systematic investment plan in the equity market as an investment option. A small sum set aside each month appreciates steadily and over time gives returns sufficient to cover the college expenses of the child. It is very important to shift the corpus to a debt instrument three to five years before the intended goal or target date of the child's college education.
Public Provident Fund: The use of a public provident fund opened in the name of the person as well as the child is a commonly followed practice .Since this instrument is in debt it is risk free and the investments are tax deductible up to 1 Lakh per annum. Financial planning for children's education using a public provident fund needs to be started when the child is very young.
Child Insurance Plans: Child insurance plans are unique and one of a kind plans in India. These may be endowment plans or unit linked insurance plans. Premiums are paid in these plans and on maturity date of these plans a maturity sum is obtained. It is very necessary to opt for a waiver of premium rider in these plans.
If the parent dies before the plan matures a death benefit is paid out immediately. What is unique about this plan is all the future premiums are waived off and all premiums are paid by the insurance Company. On maturity of these plans a guaranteed lump sum amount is paid out. The payout happens at two stages one on the death of the parent and another on maturity of the policy.
Under endowment plans investment is made in debt and returns are limited The bonus accrued is given to the investor. Under a unit linked insurance plan 100% of the amount can be invested either in debt or equity depending on the risk appetite of the investor. An investor can opt for either of them and even switch between them. The unit linked insurance plans give higher returns than the endowment plans
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Financial planning is the process of managing your funds to achieve your desired goals in the required time frame. It involves analyzing your existing financial position, expected future cash flows, inflation and identified financial objectives to develop a comprehensive financial planning roadmap. This is aimed at making available the right amounts of funds at the right time in the future.
Constant change in superannuation, taxation and social security legislation means that even simple decisions can have unforeseen consequences over the long term. This can be particularly so as we move from work into retirement. A financial planner can help you plan for your future and to avoid some of the pitfalls and traps along the way.
A financial planner is someone who uses the financial planning process to help you det ermine how to meet your life goals. The key function of a financial planner is to help people identify their financial planning needs, their present priorities and the products that are most suitable to meet their needs. He or she normally possesses detailed knowledge of a wide range of financial planning tools and products, but his major role is to help clients choose the best products for each need.
A financial plan should include a review of your net worth, goals and objectives, investment portfolio, cash flow, investments, retirement planning, tax planning and insurance needs, as well as a plan for implementing your goals.
It is important that financial plans are tax efficient. The financial plan should help you in minimizing your tax liability and also maximizing your after-tax returns from your investments. Some financial planners help their clients in preparing and filing their tax returns.
It is good to review the plan when there is a lifestyle change such as marriage, birth, death or divorce. Any change in financial position should be evaluated as well. Most people have an annual update that reviews how the plan is being implemented. The review also considers changing goals and circumstances.
A financial plan can tell you what is required to achieve your goals, but it can not ensure you attain them. There are many circumstances beyond your control such as inflation, recession, political changes, your individual circumstances etc, which might hamper the achievement of planned results.
The sooner you start your financial planning the better it is as it gives you more time to plan and gives your money more time to grow . Planning early increases your return possibilities while simultaneously reducing your risk.
Insurance planning is an integral part of financial planning. An insurance plan takes care of the unforeseeable demands on your finances. For instance, an unfortunate illness requiring a surgery can be covered under a medical insurance plan and you need not dig into your savings and other investments to pay for it. In effect, insurance helps to keep your financial plan on track.
The duration of a financial plan depends on the goals that it sets out to achieve. It can cover Short term, medium term and long term goals. Short term goals are normally targeted in a 1 - 3 year framework, for example a vacation abroad Medium term goals fit into a 3-5 year horizon, for example, buying a home Long term goals are achieved in a period of 5 years or more, for example retirement planning
There are various kinds of needs, some of which are listed below -: Retirement Child's Education Child's Marriage Asset purchase Insurance Investment Tax planning
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A child goal is part of a financial goal. A financial goal states in money terms what your current financial status is. It is an idea of where you stand financially. What are your financial assets and so on?
The next step is where you want to be financially in a specific time in the future.
Your financial goal can be a medium term goal such as providing a good education to your child. For this you might need to invest money over a medium term say 5-10 years for your child’s higher education called a child goal. For this you will need an online child goal calculator.
Step 1: You need to plan for your child’s higher education as early in his life as possible. You enter the child’s present age by using the slider in the age of the child slot in the online child goal calculator. You can also fill in the age directly in the “age of child” slot of the online child goal calculator.
Step 2: You need to have an idea at what age your child might need this money for his/her marriage or higher education. You enter the child’s age at which the money is required by using the slider or directly in the “age of the child at which you require the money” slot of the online child goal calculator.
Step 3: The numbers of years to the financial goal of your child’s education or marriage is calculated directly by the online child goal calculator.
Step 4: You need to know what the present cost of the child’s education or marriage will be. You enter this cost in the “Present Cost” slot.
Step 5: You need to project what the average rate of inflation over the time period will be. Inflation is the general rise in prices of goods and services in the economy over a period of time. You enter the rate of inflation in the “inflation slot” provided.
Step 6: Using the present cost which you have filled and the projected inflation rate the online child goal calculator calculates the amount you would require for the future child goals in the “future costs” slot.
Step 7: You have to fill in the amount you have currently invested so far towards your child’s goals in the “amount invested so far” slot.
Step 8: You have to fill in your expected rate of return on investment in the “return on investment” slot.
Step 9: The online child goal calculator calculates the monthly amount you need to invest to get the required amount for your child’s goals.
Step 10: The online child goal calculator also gives the yearly amount you need to invest to get the required amount for your child’s goals.
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