How is a Child Education Plan Beneficial?

Every goal requires an efficient execution plan. Since finances play a crucial role in everyone’s life, it is important to consider a systematic financial plan to reduce the risk of uncertainty from future events. This is especially important for child education plan, as education costs are constantly increasing.

If we observe the current trend, the number of members in a family is reducing. With the rising inflation, it can be a burden on the breadwinner of the family to maintain family expenses, especially education-related with the current market scenario.

Education is considered a fundamental right and a key determinant of socio-economic development. However, in recent years, the cost of education in India has been steadily increasing and this development has imposed financial barriers for many families.

This is more accurate for higher education, where the expenses have skyrocketed, posing challenges for aspiring students and their families. Therefore, a child’s education plan should be prepared with utmost priority. There are a few steps with which we can plan for a child’s education and a better future.

What is a Child Education Plan?

The child education plan is an investment product to fund the child’s education over the policy term, where one needs to pay a certain premium either monthly, quarterly, half-yearly, or annually over the policy term in return, the insurance will either be paid in lump sum at the time of maturity after reaching a particular age or certain periodic payments are made at different stages of education, age or depending upon the policy one has opted for.

Child Education plan is further divided into private and government child education plans:

Private Child Education Plan

Offered by private insurance companies with a combination of investment and insurance. Here are some common types:

• Traditional Endowment Plans: These plans offer guaranteed returns and a lump sum payout at maturity. They also provide life insurance coverage for the policyholder. Good for those who prioritize safety and predictable returns, even if they might be lower.
• Unit Linked Insurance Plans (ULIPs): ULIPs invest in market-linked instruments like stocks and bonds. They offer the potential for higher returns but also come with market risks. ULIPs typically provide a life insurance benefit and various investment fund options. Good for those comfortable with some risk for potentially higher returns.

Government Child Education Plan

The Indian government is promoting education through various schemes and plans. Here are some most popular options:

1. Sukanya Samriddhi Yojana: The Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme launched in India specifically for girl children. It aims to promote girl child education and empower them financially.
   Where to Open an Account: You can open an SSY account at a designated post office branch or authorized bank branch.
2. Sarva Shiksha Abhiyan (SSA): Sarva Shiksha Abhiyan remains a crucial initiative in India’s pursuit of universal elementary education. SSA strives to empower children and build a brighter future for the nation by ensuring access, improving quality, and promoting inclusivity.
   The Sarva Shiksha Abhiyan (SSA), translated to “Education for All Movement” in Hindi, is a flagship program by the Indian government aiming to achieve universal access to quality elementary education. Launched in 2001, SSA focuses on providing education to children aged 6 to 14 years.

Challenges and Looking Ahead

• Still, parents are facing certain challenges regarding the quality of education and their budget as an increase in inflation every year is posing a huge challenge in front of them
• Despite being an unpredictable life every person needs certainty which will provide mental peace and a satisfactory life, hence why fear when a child’s education plan is there plan your future with us.

Here is a Breakdown of the Key Steps to Get Started

Estimate the cost of Education- Covering factors like the type of school (private, public), degree (P.G./ U.G.), and factors adding on to inflation.

Let’s understand this from an example

Let’s take two families A and B, who are neighbours. Family A has a child of 3 years, while Family B has a child of 18 years. Family A was walking through the lane and they heard the head of Family B saying, ”I don’t have that much money, I have to clear my debts. I don’t think the bank will lend me more money. How will I pay the college fees?” These words created a sense of worry for Family A.
As they reached home, the lady discussed the situation with her husband and they asked him, “Why are you tense? We will make a child education plan for our child, which will help us combat inflation and uncertainties in the future.

Then their wives asked them,” How will it be beneficial?” our child is currently of which age?
She replied, three years old, we take an inflation rate of 7% and expected return of 14% as the market scenario, assume current higher education expenses of Rs. 10,00,000, and if we invest till 18 years, so here is the education planning summary. Have a look:

Okay, when we can start this plan, listen “We can invest either through SIP (Systematic Investment Plan) or in Lump sum payments.

Nemi Wealth offers goal-based investment solutions. The process is completely paperless and can be tracked & managed at your convenience via mobile app. Click here for a free consultation.