Features and Benefits of Child Education Plans: All You Need to Know

Ensuring a bright future for your child is a top priority for every parent. A crucial step in this direction is planning for their education. Child education plans are financial instruments specifically designed to help you save for your child’s academic goals.

They allow you to save and invest in a way that meets the growing demands of higher education expenses. These plans usually range from specific savings accounts to investment options tailored to meet educational goals. Each of them has their own set of benefits and considerations.

Types of Child Education Plans

Choosing the right investment avenue for your kid can be overwhelming, given the plethora of options available. Bajaj Markets is a financial marketplace where you can find different types of plans ranging from fixed deposits to mutual funds.

Make sure to check the features of various plans before you zero in on a specific option. Here are a few types that you can consider:

Child ULIP Plans

These Unit Linked Insurance Plans offer a dual benefit of insurance and investment. Check out some of their notable features below-

• A portion of your premium goes towards a life insurance cover
• The insurer invests the remaining amount in market-linked funds 
• The investment component can grow over time, providing a corpus for your child's education ULIPs offer
• flexibility in choosing investment options and the potential for higher returns
• Since they invest a part of your premium in market-linked securities, they also carry a certain degree of risk

Child Endowment Plans

These are traditional insurance products that provide a lump sum amount on maturity. The following are some of their features and benefits- 

• These plans offer a guaranteed return, making them a safer option compared to ULIPs
• While the returns may be lower, they provide a sense of security 
• Some plans also offer partial withdrawals for specific educational expenses, providing flexibility

FD for Children

It is a popular and low-risk investment option for children's education. The following are the advantages you can enjoy with a fixed deposit for children- 

• They offer a fixed rate of return, making them predictable 
• While the returns may not be as high as other investment options, FDs provide stability and security 
• You can open a recurring deposit or a lump sum FD, depending on your savings capacity

Benefits of Opting for Child Education Plans

These savings and investment avenues offer a comprehensive approach to achieving this goal. The following are some of the advantages you can enjoy-

• Build Corpus for Child’s Education

The primary benefit of these plans is building a substantial corpus to fund your child's higher education. Regular investments, coupled with the power of compounding, can help you accumulate a significant amount over time.

• Flexibility and Liquidity

Many child education plans offer flexibility in terms of premium payment options. You can choose from regular premium payments or single premium options to suit your financial situation.

• Hedge Against Uncertain Times

Inflation erodes the purchasing power of money over time. Child education plans help you hedge against inflation by providing a steady growth rate for your investments.

• Diverse Investment Options

You can choose from a range of child education plans. These allow you to invest funds based on your risk appetite. This flexibility enables you to optimise your returns while managing risk effectively.

• Inculcate a Habit of Savings

Starting a child education plan at an early age instils the habit of saving in your child. By witnessing the growth of their education fund, your child can develop a strong financial discipline.

• Tax Benefits

Many of these plans offer tax benefits under various sections of the Income Tax Act. For instance, by investing in a tax-saver fixed deposit for children, you can enjoy tax benefits of up to ₹1.5 Lakhs in a financial year. 

Things to Consider Before Applying for Child Education Plans

Choosing the right investment avenue is a significant decision that requires careful consideration. The following are the factors to consider-

• Cost of Education

Research the tuition fees, accommodation expenses, and other associated costs for the desired educational institution.

• Time Horizon

Consider the time horizon between the plan's inception and your child's expected enrollment date.

• Risk Assessment

Choose a plan that aligns with your comfort level and risk appetite based on your financial requirements.

• Alternatives to Child Education Plans

While child education plans offer specific benefits, it is essential to explore alternative investment options.

The right education plan can be a powerful tool in securing your child’s academic and personal growth. Before selecting a plan, keep in mind that each child’s needs are unique. Take the time to assess their individual requirements and interests.

Ensure that you align these with the best educational plan to support their development. Also, regularly review and adjust the plan as your child progresses, ensuring it evolves with their changing needs and goals.