Key factors to consider while buying a child plan

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June 30, 2021 5:32 PM

Child plans are known to offer greater returns when compared to traditional investment avenues such as PPF or FDs.

Mutual fund, mutual fund investment, commonly used mutual fund terms, investors, Net Asset Value, NAV, Dividend option, growth option, Systematic Investment Plan, SIP, Expense ratio, Benchmark index, Sensex, Nifty 50, financial planning, intelligent tips on financial planning, Deductions for children's tuition fees, child planning, financial planning, intelligent tips on financial planning, gold, Deductions For Medical Expenses, Deductions for children's tuition fees, EPF contributions with VPF, rent, tax saving, income tax, smart ways to save tax, without making any investment, home loan, Deductions For Medical Expenses, Deductions for children's tuition fees, EPF contributions with VPF, rent,Endowment plans are ideal for investors who do not like taking a risk on their investments.

Various insurance companies offer child plans, ranging from traditional plans to market-linked policies. While traditional plans invest only in debt funds, market-linked policies allow policyholders to invest both in debt and equities.

Industry experts say it is necessary to consider the range of events for the child starting with schooling, hobbies, higher studies, sports, etc. and then make provisions for them before opting for a child plan.

Child plans usually offer guaranteed payouts for financing the child’s education so that they can lead a comfortable life ahead. In the case of any unfortunate circumstance, even if the parents are not around, the child’s needs will be taken care of. Similarly, in case of death or disability of policyholders, child plans make periodic payments and provide for the child’s goals. As these policies also come with an in-built waiver of premium, the future premium for the policy is waived off, if anything happens to the policyholder.

Experts say child plans are known to offer greater returns when compared to traditional investment avenues such as PPF or FDs.

To start with, start early. These investments provide a long horizon to invest, helping the investor to periodically build wealth, hence, starting early is the key with these child plans. Experts say choose a plan that encourages long term investment.

Choosing the right plan is equally important. Try to opt for a plan that suits every need and goal, as the goals and ambitions of every child are unique and vary. This way you will have the proper financial planning in place to help your child fulfil his/her dreams in the future.

Choosing the right category of the fund is also necessary, for instance, if you have a high-risk appetite opt for equity-linked plans. Hence, experts say considering a time frame of at least 10 years and above with equity investments tend to give good returns, which will help your investment to grow. Additionally, with a child plan having a balanced mix of both debt and growth funds along with risk cover, is the ideal mix.

For low-risk appetite individuals, experts say, endowment plans are the right way to go. Endowment plans are ideal for investors who do not like taking a risk on their investments. Note that this will not only give you an adequate cover but will ensure protection against volatile market conditions.

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