Choosing the right education plan for your child

"If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest." – Ben Franklin.

Being responsible parents, we do everything that may secure the future of children, and providing the best education to them remains the top priority of most parents in India, where the purpose of education is beyond knowledge acquisition. Undoubtedly, education is the most profitable investment that secures generations and builds nations. So, while choosing an education plan for your loved one, you must compare all the available options and select the one that scores above the other on the following parameters.

Understand Your Financial Situation

Before diving into specific education plans, it's crucial to assess your current financial situation. Consider your income, savings, and any other financial commitments. Establish a realistic budget that accounts for your long-term financial goals, including your child's education, retirement, and emergency funds. Understanding your financial capacity will help narrow down education plans that align with your means without compromising your overall financial health.

Set Clear Education Goals

Every family has unique aspirations for their child's education. Start by setting clear goals: Do you envision your child attending a private school, studying abroad, or pursuing advanced degrees? Defining these goals early on will guide you in choosing a plan that supports your vision. Remember, goals can evolve over time, so it’s important to choose a flexible plan that can adapt to changing circumstances.

Carefully Study all Features

When selecting a child insurance plan, it is essential to thoroughly review its features and benefits. Consider whether the plan includes riders or a partial withdrawal option. Child insurance plans often offer riders in three key categories: premium waiver, critical illness, and accidental death and disability. A critical illness rider provides coverage for specified pre-existing conditions, while accidental death and disability riders offer an additional sum assured in the event of the policyholder's death or disability due to an accident. Additionally, the partial withdrawal option is an important factor to consider, as it allows policyholders to access a portion of the funds in case of emergencies.

Research Fees and Costs

Be mindful of the fees and costs associated with each education plan. Some plans have management fees, investment expenses, or other administrative costs that can eat into your savings over time. Compare these costs across different plans and consider their impact on your overall returns. Opt for plans with lower fees to maximize the growth potential of your investments.

Never Postpone the Invest Decision

Investing early in your child's future significantly enhances their financial security. Many plans offer maturity benefits when your child reaches college age or turns 18. By starting an investment early, ideally at birth rather than at age 12, you can ensure that the maturity benefits are available when they are most needed, such as during your child’s college years. Delaying the investment until your child is older could result in the maturity benefits becoming available later than optimal, potentially impacting their educational funding needs.

Review and Adjust Your Plan Regularly

Once you've chosen an education plan, it’s important to regularly review your progress and adjust as needed. Changes in your financial situation, market conditions, or your child's educational goals may necessitate adjustments to your plan. Regular reviews will help ensure that your savings stay on track to meet your objectives.

Final Thoughts

A child education plan should include a premium waiver benefit, which waives future premium payments in case of a parent's death. The child receives the death benefit and maturity benefit once the maturity date is reached. The insurance company pays all remaining premiums. Equity-linked plans (ULIP) allow a portion of premiums to be invested in financial securities like equity and debt funds, offering good returns but being risky. For those with a low-risk appetite, an equity-linked plan is a smart choice. Child plans come in two forms: ULIP plans and endowment plans. Endowment plans pay a lump sum amount after a specific term, such as maturity or death of the assured.