If you are thinking of investing in your child’s future, you may have thought or considered child insurance plans or the Sukanya Samriddhi Yojna. However, you might also be confused between the choices. Your selection may be influenced by the amount of money needed, the expected return and the risk involved.
Why should you start investing early for your child?
Early planning for your child’s future can make all the difference. Starting the savings process earlier gives you more time to achieve your financial goals, such as paying for your child’s school, wedding, or helping them start their career.
Sukanya Samriddhi Yojana (SSY)
This is a program supported by the Indian government under the Beti Bachao Beti Padhao initiative. The SSY was introduced to provide a means of saving for all the daughters of the family in the country. The SSY program aims to improve the lives and safeguard the future of girls in the country. The SSY is valid for 21 years from the date the account is established or until the girl turns 18 and gets married.
Benefits of Investing in SSY
- A minimum deposit of Rs 250 is required to open an SSY account. The maximum deposit amount is Rs 1.5 lakh.
- Once the girl turns 18, parents can withdraw 50% of the amount to cover school fees. Proof of admission is required.
- Contributions to the plan are eligible for tax benefits of up to Rs.1.5 lakh under Section 80C of the Income Tax Act 1961. In addition, interest earned on the deposit is also tax exempt.
- After 15 years, you do not need to make a deposit until the deposit matures, which is 21 years from the date the account was opened. Interest on the deposit will continue to accrue.
- Premature withdrawal is permitted in exceptional cases involving the needs of a girl child. Even in the event of the death of a guardian or parent, early withdrawal is permitted.
Children’s insurance plans
Children’s insurance is a type of cumulative investment insurance plan offered by life insurance companies that provides financial security for your child’s hopes and ambitions. You can invest in your child’s important aspirations with a children’s insurance plan. Children’s insurance plans are designed to meet the financial needs of children for further education, marriage and other activities. A good financial plan provides financial support for your child at every stage of their life. Children’s insurance policies are designed specifically to meet the financial needs of children.
Benefits of Investing in Children’s Insurance Plans
- A life insurance policy that pays a fixed sum insured to your child in the event of an adverse event occurring during the period of insurance.
- In the event of an unforeseen incident, the premium will be cancelled.
- A lump sum payment is made when the contract matures to help your youth achieve their long-term goals.
- As a reward for your investment, you will have more money added to your account.
- Unlimited partial withdrawals free of charge.
- Unlike the SSY, the children’s insurance plan is available for both girls and boys.
Any investment process requires some form of planning. You must prepare the investments that you think would be beneficial to help you achieve your financial goals, whether for a short or long term. Saving is a crucial aspect of the investment process. You need to calculate the amount you think will be enough to support your child. Both of these investment options can help you build a secure financial future for your child. However, when selecting the investment, consider various factors such as limits, cash flow, tenure, and need.
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Article first published: Wednesday, February 23, 2022, 11:28 a.m. [IST]