5 Factors to Keep in Mind when Purchasing a Savings Plan for Your Child

5 Factors to Keep in Mind when Purchasing a Savings Plan for Your Child

As a parent, do you find yourself frequently worrying about your child’s future? Given the rising expenses and increasing competition, it is only natural to feel stressed. You have to prepare yourself financially to meet all their needs and requirements, leaving no room for compromise.

With this objective in mind, the best way to secure your child’s future is to invest in a suitable savings plan. Planning for your child’s expenses as early as possible can help you accumulate a sizable corpus through endowment insurance, thus ensuring that nothing comes in the way of your child’s dreams.

What is a Child Savings Plan?

It is a savings plan for kids that focuses on meeting their future expenses by providing financial protection through saving investment plans and life cover.

What factors to consider while buying a child savings plan?

If you plan to give your child the gift of a sound financial future, you must keep certain things in mind while purchasing a savings plan. We will discuss some important factors that can help you decide which endowment plan is best for your child.

  • Plans that provide benefits of a premium waiver: The best feature of a savings policy for children is one that comes with a premium waiver. It means that in the case of the unfortunate death of the parents within a certain period, the sum assured will be completely paid to the beneficiary and that the insurance company will waive the remaining premiums. If the premium waiver feature is not available in your child’s saving investment plan, do ask for it.
  • Go for plans with a partial withdrawal option: While choosing a savings plan for kids, take a policy that allows for partial withdrawal of money. It implies that as a parent, you can withdraw small portions of the fund whenever required to meet the needs of your kids.
  • Choose a plan that assures a high sum: In a savings policy for a child, the sum assured is the amount that your child receives if any unfortunate event occurs. So, while deciding which plan to buy, choose the one that offers a sum of at least ten times your gross income. Also, see that the plan yields adequate returns to beat inflation sufficiently over the years.
  • Examine the policy term and the premium amount with care: When you browse for a savings plan for kids, choose a policy term that matches the expected financial goals for your kid. The tenure can be selected as per your child’s educational timeline so that the funds are available by the right time. A saving plan calculator can help you decide on this matter.
  • Go for extra riders: Many insurance companies provide saving investment plans for kids that come with the benefits of rider covers. Some of the riders include accidental death, physical disability, critical illness benefits, and so on. It is better to add these riders into your policy at fewer costs to improve your child’s life insurance cover. You can use a saving plan calculator available online free to determine the additional costs. All these benefits can be found on the websites. For example, Tata AIA online has a list of all the plans and the rider options available for those.

There is no gift better than the promise of a safe and secure future. As a parent, you must start planning for your little one to create a robust financial backup so that they keep dreaming and achieving without facing any hurdles.