Saving for Your Child: Prepare to Save for Your Child's Future Needs

As parents, we must ensure that our children grow up to be happy, healthy, and well-educated. But if the pandemic has taught us anything, it is that we live in times of uncertainty. Increasing prices, slowing economies, and increasing lifestyle diseases make all parents think and plan for their children's future. An essential aspect of building a secure future is finance.

As inflation continues to rise, young parents need to start saving as early as possible. Think of children's savings as more than an investment for child education – it is a way to build wealth for your children's future. The best investment plan for your child covers all aspects, including education and healthcare.

Why is it Important to Save for Your Children?

To ensure a safe and prosperous future for your children, it is imperative to build some wealth for them. Parenting is not just about investing in your child's present and fulfilling their day-to-day needs. The responsibility extends all the way to the day they come of age and become capable of leading their lives as adults.

Children need financial support at various life milestones as they grow up. To begin with, they need quality education, good nutrition, and regular medical check-ups in their childhood. A couple of decades down the line, it's time for college. As inflation rises, fees for higher education are also increasing. It is essential to begin saving early to build sufficient funds to finance the higher education of eminence.

Not only that, but if your child aspires to build a business of their own, you could also build a corpus to help finance their dream venture. The money will act as a safety net to protect your child if they fall into financial difficulties.

Planning for the Big Events in Your Child's Life

Everyone goes through essential milestones in life, and so will your children. Planning well and starting early helps you stay financially prepared to meet your child's needs when the occasion arrives. Some critical events in your child's life are –

• School Education

  Whenever you begin planning for school education, you should calculate your savings based on the school fees, expenses for extra-curricular activities, inflation, and other expenses associated with education. Other expenses may include uniforms, books, and stationary expenses.

• Higher Education

  Fees for higher education in any field are high. If your child chooses a professional course like medicine, engineering, or literature – you must be prepared to pay college fees. If you wish to send your children overseas, you must save accordingly. Sending your child abroad for higher education is even more expensive than studying in India.

• Wedding

  Most people decide to get married at some point in life. When the time comes for your child to marry their significant other – they will probably be young and at the beginning of their careers. It may not be possible for them to finance their wedding. To support them with wedding expenses, you must begin saving today.

What are the Biggest Benefits of Investing in a Children's Saving Plan?

A children's savings plan comes with benefits for both kids and parents. They not only help you stay prepared for any eventuality in your child's life, but the plan is also helpful in organizing your finances and helping your money earn good interest. Here are some key benefits of investing in a children's savings plan –

• The Dual Advantage of Savings & Life Cover

  A children's savings plan offers a double benefit to children and parents. It builds savings for your child's future and offers life cover for the child.

• Emergency Fund

  A children's savings plan is equivalent to an emergency fund for use in a dire financial situation. You can also make partial withdrawals if the need arises.

• Financial Security

  If your family goes through an unfortunate event, such as an untimely death – a children's plan provides a lump sum payment in the form of a claim amount. Furthermore, the plan continues to be active, and the life insurance company takes care of all future premium payments. The final amount received at the end of the policy term will help your children fulfill their dreams.

• Tax Benefits

  Under section 80C, you may avail of tax benefits on the premium you pay for your children's plan. Premiums up to Rs. 1.5 lakhs are eligible for tax benefits. The pay-out received at the end of the policy term is also exempt from taxation under Section 10(10D).

Options Available to Help You Save for Your Children

Depending on the kind of corpus you wish to build for your children's future, you can choose the best savings plan for children. Consider the premium amount, term, benefits, and savings goals before choosing a children's savings plan. Here are some options you may consider –

• Term Insurance Plan

  If you are looking for a child-saving scheme that secures your child's future even after your death, term insurance is the best investment plan for kids. Upon your death, your child will receive a lump sum to help them with future expenses.

• Savings Plan

  You can find several savings plans in India that offer life insurance with savings plans. The plan works like an insurance policy that secures your child's future with financial protection and guaranteed savings.

• Sukanya Samriddhi Yojana

  The Sukanya Samriddhi Yojana is a savings scheme for the benefit of the girl child. Parents of girls aged ten years and below can open a Sukanya Samriddhi Yojana account in any designated bank or post office. The interest rate for this savings scheme is 8.5%. Learn More About Sukanya Samriddhi Yojana(SSY)

• ULIPs

  A unit-linked insurance plan or ULIP is an investment plan for kids that offers the opportunity to grow your money while securing your child's future. You may choose from a range of funds per your needs and invest in the plan for the long term. There are benefits to staying invested for a longer time.

• Recurring Deposits

  A recurring deposit is a term deposit wherein you must deposit a fixed amount each month and earn interest on it. For those with inconsistent monthly income, recurring deposits may be the best way to create savings for kids.

How to Start Saving for Your Child's Future Needs?

Parents may know why they need to save for their child's future and be aware of the different schemes available. But many parents don't know where to begin. In the following points, you will find a step-by-step explanation of how to start saving for your children –

• Step 1. Evaluate Your Child's Needs

  The first step to starting a savings plan is understanding your child's needs. Try to draw a rough picture of the future you wish for your child and estimate the cost of education. Think about the cost of primary education, healthcare, higher education, overseas education, and other needs. A thorough evaluation exercise will help you set a savings goal.

• Step 2. Start Early

  For any long-term savings plan, starting as early as possible is essential. The sooner you begin, the more you can save. Starting a savings plan later in life may prove costly for parents.

• Step 3. Diversify Your Savings

  Carefully consider the different types of savings accounts available to you. Don't rely on only one investment option; aim to diversify your savings. It will mitigate risk and enable your money to grow better than if you invest in only one plan.

• Step 4. Keep Track & Check the Fund Every Quarter

  Remember to analyze your savings account to keep track of your money and compare the plan with your peers in the same category. Review the performance to ensure you are invested in the best savings plan for your kids.

Conclusion

All parents want to invest lucrative to secure their child's future. But only those who plan early and research well can build a significant corpus for their children. Before you decide which are the best investments for children's future, consider the safety, tax liability, and returns. Remember to factor in inflation when calculating education expenses. Start saving as soon as possible and enjoy the benefit of compounding in the long run.