Fund : An amount of money saved or collected for a particular purpose
Return : Profit or loss derived from an investment
It is a type of pure insurance plan where the beneficiary will get the benefit only in case of death of the policy holder during the policy term.
In this type of mutual funds, your funds will be in invested in equities i.e. in the stock market..
Amount paid to the insurance company for the purpose of the person's insurance.
It is the raise in the value of Consumer Price Index. That is the rate of increase of the price of a goods or services.
I am reminded of a Tamil saying, “Experience what it is to build a house, and get a child married”, probably that is the reason why wise parents invest to meet the long term financial obligations like education and marriage cost of their children. In addition the rising inflation rate also calls for starting savings early in a child’s life. However it would be advisable to know, evaluate and compare various means of savings. This could also enlighten you about how “child plans” need not be the only method.
Disadvantages of a Readymade “Child Plan”
Most of the “Child plans” in the industry comes with a catchy name to capitalize the “Child sentiment” in us.
Alternatives for Child Plan:
It is to be noted that other investment products like Public Provident Fund, National Savings Certificate, National Savings Scheme, RBI bonds, post office deposits and instruments and mutual funds that serve the purpose of savings and increasing of capital value apply equally well to investment for a child’s future.
Mutual Fund as a Child plan:
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PPF and Child Plan:
PPF or Public Provident Fund is also good as mutual funds, with opening a PPF account for a 20-year period in a child’s name helping to meet long time financial obligations of children.
It has been stipulated that an annual investment of just Rs.100000 in PPF would leave you with almost Rs.46lac as a result of the compounding effect. It is difficult for a “child plan” with insurance component and upfront charges to offer you such a great return without taking much of risk.
An Ideal Mix:
So whenever, you think of child plan think of a customized investment plan for your kid’s future with a mix of 2 or 3 investment options instead of readymade product with a tag “Child Plan”. I am sure you would agree that readymade child plans prove to be not ideal instruments to save. The wisest line of thought would be a mix of diversified investments that gives good return with low charges.
Do you agree that readymade child plan is not a better investment idea for your child? Kindly share your views in the comment section.
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