Can I Set Up An Investment Account for a Child?

A simple answer to the question is yes. We can set up an investment account for a child.

A child investment account assures the child's safety in the case of an unfortunate event such as the sudden demise of the parents. The main goal of a Child Plan is to make sure the requirements and necessities of a child are met.  

The bright side of investing in a child insurance plan has a vast horizon. The child's education is taken care of, makes a habit of saving, a reliable source of help, collateral for loans, and the child is taken care of if the guardians suddenly demise.

Key Aspects To Consider While Buying A Child Plan

We must look into a few aspects before choosing the right Child Plan to invest in. A few such aspects are as follows

• Time Frame

A word from the experts is that child plans offer greater returns than traditional investments such as PPF or FDs. It is better to choose a plan that encourages long-term investment. Hence, choosing a time frame of at least 10 years or more with equity investments will yield good results.

• Risk Appetite

Risk appetite can be defined as the ability to take certain risks to make some gains. The risk appetite depends on factors such as age, life stage, number of dependents, nature of the job, etc. For instance, a person just about to retire might have a low-risk appetite compared to a youngster. This will be the case even when both of them have a similar job title and a similar salary.

• Sum Assured

The amount of money that is paid out when an unfortunate event occurs in a child education plan is called the sum assured. It is generally 10 times the current gross earning of the policyholder. In many instances, choosing an insurance policy is about having guaranteed financial protection. Sum assured must be carefully chosen while buying a child plan.

• Loan Facility

While choosing a loan facility, compare different loan terms and choose the shortest loan term. Compare interest rate, balloon payments, the total amount owed, and monthly payment and choose a suitable one.

• Partial Withdrawal

Any part of the fund that is withdrawn by the insurance holder during the term.

Top 3 Child Plans in India 2021

The most recent list of best saving child investment plans are as follows:

• Aditya Birla Sun Life Vision Star Plan

A traditional money-back plan is proposed by Birla Sun Life Vision Star, where periodic payments are required throughout the policy term. Parents can be from the ages 18 to 55 to be able to invest in this plan. The maturity of the policy is 75 years. The policyholder is allowed to choose from two options being periodic payment and survival benefits. 

• ICICI Pru Smart Kid's Regular Premium

This plan provides an endowment regular premium plan. This plan comes with educational benefits. In case of an unfortunate event, the company pays a lump sum of sum assured and future premiums. It also protects against accidents or disabilities. The educational expenses of the child are also taken care of. Partial withdrawals are also available in this plan. At the end of the 15th policy year, 120% and 170% of the annual premium are allocated to your fund value.

• Kotak Head Start Child Assure Plan

The plan offers a Unit Linked Child Investment Plan. It is available in both regular and limited premium payment options. This plan also allows partial withdrawals every 5 years and four free annual switches. The eligibility to invest in a child plan of the parents starts from the age of 18 to 60. 28 days is the minimum maturity age in this plan, and the maximum of the same can go to 70 years. The range of the policy term options is from 10 to 20 years. This plan has two premium payment options being half-yearly, and yearly.

Conclusion

A child plan helps take care of the child's basic needs and assures financial safety to the child in case any unfortunate events occur. It is beneficial to buy a child plan for both the parents and the child. While taking a Child plan, certain aspects like time frame and risk appetite are to be taken into consideration.

Also read 

How to Choose the Best Child Insurance Plan?

Which is the Best Child Education Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard