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Top Saving Plans for Your Kid's Education

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August 03, 2021

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Gone are the days when parents started planning for their children’s education expenses a couple of years before they had to leave for college. That was, of course, before private school fees skyrocketed. Now, every parent also has ambitious plans for their children involving education at a premier institution in India or the best universities abroad.

All of this means that saving for kids is now a planned affair. Every parent is on the lookout for the best savings plan for their child! Thankfully, we’re here to help!

How can I choose the best savings plan for my child?

First things first, start as early as possible. This is the easiest way to amass a significant corpus that will come in handy as you’re choosing between institutions.

Now, let’s look at some important factors that require our due attention:

  1. Premium waiver benefits:

    The best savings plan for your child should definitely include a premium waiver. This is a classic protection mechanism wherein the child gets the entire sum assured even in case of the parent’s unfortunate demise. Additionally, all the remaining premium payments are automatically waived, reducing the financial burden on the family! 

  2. Partial withdrawal feature:

    You might opt to save for multiple education goals with one plan. The money you build-up could help pay for coaching classes, junior college and university education. If this is the case, you may need to make multiple withdrawals from your savings plan. Make sure that your plan supports such requirements.

  3. Check the policy term and premium:

    When you put your hard-earned money into the best savings plan for your child, it must be available to you exactly when you need it. Carefully check when your policy matures and how it will match up with the age of your child. Your premiums will get impacted accordingly.

  4. Sum assured must be high:

    As we explained in the premium waiver section, in the event of an unfortunate demise of the parent, the sum assured is immediately released. So, you must ensure that this amount is of significant value. A good thumb rule is to make the sum assured ten times your current income to take care of inflation.

What are the types of savings plans available for my child?

Now that we’ve seen some of the important factors to consider, let us look at what types of savings plans will offer you the most value for your money! The primary guide here is the tenure or timeline that is available to you before your child is off to college. When you have a longer timeline (more than 10 years), you can afford to take risks, whereas when your window is just 3-5 years, you must play safe.    

Let us look at two alternatives:

  1. Traditional savings plans:

    Endowment insurance policies are low-risk investment options and are ideal when you’re looking for a short-term window (< 10 years). While they do not give you the higher returns of a ULIP, they are safer and ensure a lump sum at maturity or in the event of an adversity.

  2. Equity-linked plans:

    These include Unit Linked Insurance Plans (ULIPs), where a part of the premium goes towards a life term cover and the other part can be invested in market instruments like equity funds, debt funds or a combination of both. The investments can be made as per your risk appetite using multiple portfolio management strategies. When you have a longer window (>10 years), these are the best savings plan for your child, ensuring higher returns on a lower investment.

What are the benefits of these types of child savings plans?

Many among us underestimate the importance of a child savings plan intended purely for your child’s future. After all, everything we have is for our children, right? So why add a special child savings plan to the portfolio?

While that may be true in general, there are some undeniable benefits of a focused investment:

  1. It is goal-based:

    Based on existing education expenses and future estimates, you decide early on as to the corpus you would like to have at your disposal. Now that your goal is fixed, you can look at various investment opportunities to fulfil that requirement. All that remains is to pay your premiums on time and you and your child are set for a stress-free future!

  2. It ensures financial support:

    Child plans usually come with a premium waiver option. This comes into play in the event of the policyholder’s untimely demise. With this, you can ensure that your child’s future is secured even if you are not around.

  3. It takes care of emergencies:

    The best savings plans for your children allow interim withdrawals from the fund. This money will be indispensable if there is a sudden emergency like an accident or illness with significant expenses.
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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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