I am 34 years old and working in private sector. I have 3 year old daughter. I am planning to invest in a child plan of an insurance company where the money is returned in installments on different dates to take care of his education and marriage needs. Please advise should I buy child plan, if not please suggest me where should I invest the money?,
Answer: As a prudent personal financial principle one should never mix insurance and insurance Investment There is a need to buy a single product to take care of both such needs. I would not recommend you to buy any insurance plan as an investment option for your daughter’s education and marriage goals, as these insurance products are loaded with high non-refundable charges. Just because a product has the word “child” in its name, does not mean it is an appropriate product for your child. Instead I would suggest you to buy enough duration. InsuranceInvest in mutual funds, preferably online and through monthly SIPs in equity mutual funds. As far as the amount of life insurance cover required for this purpose is concerned, you will have to estimate your Future Target value at the time of her education and marriage keeping inflation in mind.
Keeping in mind the fact that your goal is at least 15-18 years away, you should invest in Nifty 50 or Sensex funds through SIPs monthly. If you are not comfortable investing in equity, you can open an account under Sukanya Samriddhi Yojana in the name of your daughter, which also offers you higher interest rate and tax benefits under section 80C.
The term plan will take care of her education and marriage needs in the event of your absence. The combination of term plan and monthly SIP/deposit in Sukanya Samriddhi Yojana will definitely exceed the amount you would get under any child plan. Consult a certified financial planner to make a proper financial plan for all your goals.
(Balwant Jain is a tax and investment expert and can be reached on his Twitter handles jainbalwant@gmail.com and @jainbalwant)
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