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According to NSSO (National Sample Survey Office) in-between 2008-2014 the main average annual private expense of general education increased to 175% along with the increase of 96% in professional and technical education. These numbers truly indicate that for children education one should not opt for ad-hock investment instead go for goal based investment with proper planning.

The cost for children education in our country (India) is quit high and majority of parents prefer to rely on private institution. Because of such scenario, every parents wish to investment in a way where they could save up a large amount of money required for their child’s education.

Let us look upon few options to invest for your child’s education.

1. Children Gift Fund: Also, known as Children Benefit Scheme, this scheme provides 2 options that are i) Equity Oriented Investment Plans and ii) Debt Oriented Savings Plan. The lock-in period in this scheme is from 5-18 years (whichever comes first). It has provides with 2 investment options i.e. lump sum or SIP. If you add a term insurance to this scheme, it becomes a win-win situation!

To know more in detail about insurance, you can watch our video: https://www.youtube.com/watch?v=o6HMSMKi3sA&t=1s

2. Sukanya Samruddhi Scheme:The government of India initiated this scheme under the campaign of Beti Bachhao Beti Padhao. This scheme is only applicable for a girl child. Let us have a look at how exactly this scheme works:

• Investment can only be done for a girl child below the age of 10 years. 

• One family can invest for any two girl children. 

• The period of scheme is for 21 years of (girl) child’s age, but for 15 years; yearly contribution is necessary. 

• Every year investment is compulsory. 

• Contribution: Minimum 250/- Maximum: 1,50,000/- 

• Current rate of interest. 

• Partial withdrawal is allowed (for withdrawal, certain rules & regulations are applicable which needs to be followed)

3. Child Policies:Generally we treat insurance & investment separately but the child policies are mostly ULIPs which turns out to be its attractive feature. In this policy the life insurance will of the parents (either father or mother, the one who will be paying the premium) and the beneficiary will be the child. Let us now understand how exactly this works:

Consider Mr. X purchases a child policy for the term of 15 years, sum assured is Rs. 10 lakh, premium – yearly 50,000/-

1. Scenario 1:Mr. X regularly pays the premium for 15 years and at the time of maturity the fund value of approx. 16 lakh (assumed maturity fund value, this amount might vary) will be received by the beneficiary i.e. the child.

2. Scenario 2:Mr. X purchases the same child policy for the term of 15 years and after paying the premium regularly for 3 years, Mr. X dies due to some uncertain reason. In such situation, on the death of Mr. X (life insured) the beneficiary i.e. the child will receive the sum assured of Rs. 10 lakh. Premium for the remaining 12 years will be paid by the company and at the time of maturity the beneficiary will again receive the fund value of 16 lakh (assumed maturity fund value, this amount might vary). So in total the beneficiary receives Rs. 26 lakh which turns out to be the unique feature of this policy.

Note:The only disadvantage is the cost structure of this policy is very high.

These are some of the products & scheme that any parents can consider for investing in the child’s education. One can even consider a regular product like SIP for financial planning of children education.

For selecting any of the above mentioned products, there are certain parameters to be taken in consideration which are as follows:

• Time horizon
• Expected return
• Lock-in period
• Risk factor
• Tax applicable

Apart from the above mentioned parameters, it is highly recommended to consider inflation i.e. whether the expected return will be able to beat the inflation or not.

To know more in detail about the factors affecting during the goal based financial planning, you can watch our video: https://www.youtube.com/watch?v=5G8_gSCz10s&t=3s

We hope that you found this article useful, for any further assistance/guidance on financial planning for children education, feel free to contact us on info@bihagbhavsar.com