Child Saving Plans in India: Secure Future

Child Saving Plans in India: Childhood is a time of innocence and wonder, but it also ushers in responsibility for parents. It is a universal aspiration to ensure that their children have secure futures. In India due to the heterogeneous and rapidly changing socioeconomic environment, parents usually look for dependable financial tools that can ensure their children’s future. One such direction increasing in popularity is Child Saving Plans. This financial instrument is created specially for Indian Parents, so they can help their children realize dreams and aspirations.

Understanding Child Saving Plans in India

A Child Saving Plan is a long-term investment and insurance product, in particular, tailor-made to meet the monetary dreams associated with an infant’s schooling, marriage, and higher education. These plans serve as a disciplined technique to put together decent sums for the future, offering a combination of coverage and good returns. In India, where the price of schooling and other critical prices are ever increasing, these plans offer a strategic way to build up funds over time.

Different types of Child Saving Plans

• Traditional Child Saving Plans:

These plans have a potential to offer fixed returns at a comparatively lower risk. Here, the money is invested in fixed-income instruments providing stability. These have lower return when compared to other market-linked plans.

Name of the Plan	Name of the Company	Eligibility Criteria
LIC Jeevan Tarun	Life Insurance Corporation of India	Minimum age of child: 90 days; Maximum age of child: 12 years
SBI Life Smart Champ Insurance Plan	SBI Life Insurance Company Limited	Minimum age of child: 30 days; Maximum age of child: 13 years
HDFC Life YoungStar Udaan	HDFC Life Insurance Company Limited	Minimum age of child: 30 days; Maximum age of child: 60 years

• Endowment Plan:

The endowment plan provides insurance and savings too. These plans have set periods of time and at the end of tenure or if policy holder dies then they provide a sum altogether. The above received on maturity can be used by the policy holder as per his/ her requirements for any of her/ his child’s financial needs- it may be education, marriage etc.

Name of the Plan	Name of the Company	Eligibility Criteria
LIC New Endowment Plan	Life Insurance Corporation of India	Minimum age: 8 years; Maximum age: 55 years
ICICI Pru Cash Advantage	ICICI Prudential Life Insurance Company Limited	Minimum age: 0 years; Maximum age: 60 years
HDFC Life Sanchay Plus	HDFC Life Insurance Company Limited	Minimum age: 30 days; Maximum age: 60 years

• Unit-linked Plan:

Unit-linked plan is a product of insurance coverage and market linked investment. This plan incurs greater risk since the returns depend on how well chosen funds perform. This plan is ideal for those who are willing to take the market risks and aim at high returns. As this is a market-based plan, it becomes volatile.

Name of the Plan	Name of the Company	Eligibility Criteria
ICICI Pru Wealth Builder II	ICICI Prudential Life Insurance Company Limited	Minimum age: 0 years; Maximum age: 65 years
SBI Life Smart Champ Insurance Plan	SBI Life Insurance Company Limited	Minimum age: 18 years; Maximum age: 50 years
HDFC Life Click 2 Wealth	HDFC Life Insurance Company Limited	Minimum age: 0 years; Maximum age: 65 years

• Child Education Plan:

Child education plan is fully dedicated to financing the needs of a child’s education. Their primary purpose is to ensure that financial limitations do not impede a child’s academic life. These plans generally offer regular pay-outs during critical educational milestones of your children. Some popular and profitable ones are-

Name of the Plan	Name of the Company	Eligibility Criteria
ICICI Pru Smart Kid Regular Premium	ICICI Prudential Life Insurance Company Limited	Minimum age of child: 0 years; Maximum age of child: 17 years
SBI Life Smart Scholar	SBI Life Insurance Company Limited	Minimum age of child: 2 years; Maximum age of child: 17
HDFC Life YoungStar Super Premium	HDFC Life Insurance Company Limited	Minimum age of child: 30 days; Maximum age of child: 60 years

Challenges and Considerations

1. Inflation: One of the challenges in long-term savings plan is considering the impact of inflation on the sum invested. As the cost of living increases, the purchasing power of savings decreases. It is important to consider inflation when determining the amount of premium and sum assured.
2. Market Risks: The unit-linked child savings plans are exposed to market risks. While they are appealing due to high returns, the value of investments may fluctuate due to volatility in the financial market. Parents should calculate the risk tolerance and investment range before choosing such policies.
3. Policy Terms and Premiums: Choosing the right duration and premium pay-out is important. Parents should align the timing of the plan with when the child is likely to need the financial assistance, such as higher education or marriage. In addition to that, choosing the right amount of premium, the one that fits in your budget, shall ensure consistent contribution.
4. Policy Customization: It is important to carefully tailor a plan based on the child’s unique needs and wishes. For example, if the primary goal is higher education, parents can opt for plans that include periodic payments along the child’s educational journey.
5. Claim Settlement Ratio: Before choosing an insurance provider, parents should research the company’s settlement rate. A high ratio indicates that claims are settled timely, reassuring parents of financial benefits when needed.

Child saving plans are a great way to secure a child’s future. They act as a shield for the kid and the family, ensuring that the kid’s future economic needs are not compromised. These plans encourage disciplined savings by offering an established technique to making an investment.

Under Section 80C and Section 10(14) of the Income Tax Act, premiums paid towards such Child Saving Plans are eligible for tax deductions. With an investment angle, the returns generated from the invested amount prove to be valuable contributions to accomplishing child’s financial needs. These returns can be in the guise of bonuses, market-linked returns, or a mixture of both.