Buying a child plan is more an emotional decision, because it is linked to your kids’ future. After all, you love your little one dearly.
Hold on, before getting into the emotional trap, ensure you analyze the plan and then proceed. This ArthaYantra post is worth reading to understand the factors that make a child plan worthy. Make a right choice to secure your little darling’s future.
First Things First!
Any fund can be a child plan if it is fulfilling the basic money needs of your kid in the long run. Thus, an ideal child plan should meet the child’s requirements.
Secure your kids’ financial future with a plan that offers liquidity, flexibility, and growth. Long-term mutual fund investments satisfy all these factors.
Money Growth with Mutual Funds
Mutual funds, with a well-diversified portfolio, are known to create wealth in the long term. The short term market volatility does not affect the returns of long term investments.
Thus, with mutual funds investments grow with time, provided a financial discipline is maintained. If you have more than 10 years on hand, consider SIP (Systematic Investment Planning) for child’s education and marriage needs. The returns would match with the massive higher education costs.
Flexibility with Mutual Funds
Traditional child plans or ULIPs do not offer the flexibility to transfer or exit. High exit penalties are burden, any day. The penalty is as high as 4% and the minimum period can extend up to 5 years.
On contrary, SIP in the funds can be terminated any day with no penalties, what so ever. You also have an option to transfer to other mutual funds whenever needed.
Liquidity with Mutual Funds
Liquidity is a special feature of mutual funds, unlike traditional child plan where the money gets fixed and cannot be redeemed until maturity.
However, mutual funds as child plans need long-term investment discipline from parents. Parents should not allow the liquidity opportunity to defeat the purpose of securing the child’s future.
Plan for other Financial Needs as well
Chances of withdrawing the money built towards your child’s education are high if you are not prepared for an emergency, health, retirement, home etc. Thus, to ensure that you do not disturb your child plan, a complete financial planning is needed.
Approach ArthaYantra for assistance in creating your personalized portfolio that includes all your major money goals in life. Understand that every goal has a different time frame, different requirement, and different investment risk. So treat each one separately. Our holistic advice on personal finance secures your financial future.
In conclusion, a combination of simple investments and life cover offers much better chance to meet your kid’s future money needs. Term policy helps you secure the child plan even in your absence.
