Children Savings Plans

Explore various Children Savings Plans to secure your child's financial future.
Child Investment Plans
3 min
08 April 2024

benefits, the right time to start saving, and more.

Preparing for your child's future takes careful planning. Child investment plans offer a structured way to save, potentially helping your money grow over time for their significant goals. These plans often combine investment choices with insurance protection, aiming to build financial security for your child's milestones, such as higher education, a wedding, or even a down payment on a home.

Why is it important to save for your children

Your children’s financial future is uncertain. Thus, having sufficient funds in your pocket can protect them during financial uncertainty. In addition, it provides a solid foundation for their prosperous career.

How does a children’s savings plan work

The children savings plans are like piggy banks. You save small amounts regularly and let them grow over time. When a child reaches a mature age, for example, 18 or 21, that money will be compounded into a lump sum, allowing the parents to fulfil their child’s dreams.

Key benefits of children’s savings plans

Children’s savings plans can make a significant difference in their lives. They ensure your child gets the financial assistance they need to fund their higher education, marriage, or business. Below are some of its key benefits you should be aware of.

  • Guardian sudden death:
    Child investment plans ensure that if the earning guardian dies, there will be no economic burden on the other non-earning family members or the child himself. Furthermore, through children’s investment plans, the child can enjoy waivers on premiums and capital invested.
  • Tax benefits:
    Child investment plans are primarily tax-free (under the Income Tax Act of 1961). This means that the premium you pay and the amount at maturity are not considered when paying taxes. So, you can enjoy all the benefits of capital gains and returns without worrying about tax deductions.
  • Loan collateral:
    Getting a loan is considerably more accessible with a child investment plan. Several financial institutions offer the option of using an insurance plan as collateral for a loan.
  • Developing a savings mindset:
    Child investment plans encourage your child to develop a similar saving mentality from a young age, which will benefit them in future.

When is the right time to start saving for your children

There is no right or wrong time to save for your children. Starting early will help you invest a small amount regularly without straining your budget, and you will have sufficient time to accumulate a lump sum at maturity. On the contrary, if you begin saving in your children’s early years (1–8 years), you can accumulate enough money to help them as they grow older.

Key milestones you need to plan for

You must set a few milestones to ensure your children’s safe future, which are described below:

  • School Education: Every parent prioritises high-quality education for their children. Therefore, you should invest in your children’s education early on with a dedicated child education plan. These plans help you accumulate the necessary funds to cover rising education costs.
  • Higher Education: Today, many children choose higher studies abroad due to the quality of teaching and the bright career opportunities they offer. But this comes with a hefty price tag. As a parent, you must consider this when evaluating saving plan for your child savings plans for child.
  • Marriage: Your children might decide to get married early in life and need your assistance with their wedding expenses. Every parent wishes to support their children emotionally and financially, regardless of when they decide to get married. That is why planning and saving for your children’s marriage is essential.

Also Read - Investment Process

Savings options for your children

There are plenty of choices when it comes to saving for your children. These choices are worth it because they provide the right platform to get the most out of child’s investment plans. Here are a few of them:

  • Term life insurance: A term life insurance policy provides a one-time payment to your child if you pass away, helping them with crucial expenses like education.
  • Savings plan: A savings plan is an insurance policy to help you save money for your child’s future. It allows you to make regular contributions and grow the funds through investment options.
  • ULIP (Unit Linked Insurance Plan): A ULIP helps you to invest your child’s savings in the stock market and withdraw funds as needed.

Some of the popular investment options for your child

The following are some of the best investment options you can consider:

  • Fixed Deposits (FDs): Think of FDs as a safe and secure savings option. It is like putting your money in a safe deposit box at the bank, but instead of just sitting there, it earns a guaranteed interest rate over a chosen time period. This option can be used to prioritise security and predictable returns for your child's short-term goals.
  • Systematic Investment Plan (SIP): An SIP is a secure method of investing in mutual funds, which are least affected by market fluctuations. You can use SIPs to invest in equity, debt, and hybrid funds for your child’s future needs.
  • Sukanya Samriddhi Yojana: This government-funded, less risky scheme allows parents to save for their girl child when she reaches 21.
  • Debt Funds: Fixed-income mutual funds that invest in bonds and other fixed-income securities are known as debt funds. Their risks are lower than those of equity mutual funds.
  • Public Provident Fund: This government savings scheme has a 15-year maturity period. The good part is that it allows withdrawals every year from the seventh year on and can help you cover your child’s expenses.

Tips to save money for your children’s future

Saving money for children’s futures requires thoughtful planning and a few practical tips. These tips can help your money grow.

  • Start early. The sooner you start, the more you can save.
  • Make consistent deposits, even if they are small.
  • You can look for a life insurance plan that offers additional benefits, like bonuses, to enhance your overall earnings.
  • Invest the amount you can afford. If you exceed your budget, you might compromise your present needs.

Conclusion

Child investment plans ensure peace of mind, knowing you have the funds to support your child’s quality education, marriage, or business needs (if any). Investing in a fixed deposit scheme can also be an attractive option for building a secure future for your child. Fixed deposit schemes like those offered by Bajaj Finance offer high interest rates of up to 8.85% p.a., allowing you to save more while protecting your capital.    

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator

SIP Calculator

FD calculator

SDP calculator

Gratuity Calculator

EPF Calculator

Lumpsum Calculator

Step Up SIP Calculator

Sukanya Samriddhi Yojana Calculator

PPF Calculator

RD Calculator

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.