“How to Choose a One-Time Investment Plan for Your Child in India”

A one-time investment plan is also known as a single premium investment plan, which lets an individual invest in a lump sum, i.e. one single payment. This plan offers the dual benefit of investment & insurance, thus offering financial protection over a longer tenure. As this plan involves a single payment, which makes it is simple, easy, & easy to manage & receive assured returns along with market-linked growth. This plan best suits parents who want financial assistance with comfort to achieve educational, career, or any other life-related objectives.

Reasons to choose a One-Time Investment 

Provided are some of the reasons parents should opt for a one-time investment plan:

• Mental Peace

To secure the financial future, parents often struggle to pay for multiple investment avenues, such as home loans, their child’s higher education, retirement savings, etc., which may be stressful. Here, a one-time investment plan comes into the picture, relieving the stress & providing mental peace, ensuring return & protection both.

• Support for future objectives

Let us say, if a parent invests INR 5 lakhs as a one-time premium amount when the child is as small as 5 years old. This amount will help cover a major portion of school expenses, which will depend on the market situation or assured returns.

• freedom from missed premiums

This plan involves a one-time payment, hence the risk of missing payments does not arise. This plan best suits self-employed or business professionals who want a hassle-free investment.

• Financial protection

This plan offers financial security to the family members in case of an unfortunate event, thus ensuring that all educational or any other milestones are not hampered.

Steps to Choose a One-Time Investment Plan for Your Child

Provided are the steps to be followed while choosing a one-time investment plan for your child:

Step 1: Define Your Financial Objectives

Initially, determine your financial objectives, i.e. this step involves the identification of your financial goals. The financial goals may include higher education, studying abroad, marriage, etc. 

Step 2: Assess your Risk Tolerance Level

If you want assured returns, then opt for a traditional Child Plan, & on the contrary, if you want higher returns, opt for ULIPs that involve a combination of insurance & investments. Also, ULIPs provide an option to choose between debt, equity, or balanced funds, depending on your risk tolerance level. Besides this, ULIPs also give an option to switch between the funds to better optimise your allocation of assets.

Step 3: Check the flexibility & policy tenure

Check for flexibility in the plan in terms of partial withdrawals, switches between the funds, etc. The longer the policy duration, the more you can mitigate the risks involved & gain higher benefits through the power of compounding.

Step 4: Review tax & payout options

Check for the associated tax benefits & how the payout options align well with your financial goals & investment horizon. 

Types of One-Time Investment Plans for Children

Let us understand the different types of one-time investment plans for children:

• Protection-Focused Plans

Parents seeking a pure protection plan can opt for term plans with return of premium options. Though term plans offer pure life coverage, but here it can be customised according to the parents, thus securing their child’s future. This involves a time payment of premium & getting covered throughout the policy duration. 

This plan involves flexibility in coverage, a reasonable premium amount, making this child care benefit an attractive option. This feature may be opted for at the time when the plan is purchased or within one year of the birth of your child or legal adoption. 

• Goal-Based Child Insurance Plans

A child insurance plan takes care of the financial future of a child, which not only secures the financial future but also offers a flexible payout. The funds secured for the child’s future can be used for expenses, such as marriage, education, etc. A part of the premium is allocated towards investments, which can be used to build a corpus for their education, marriage, etc. Another part of the premium is allocated towards insurance, which ensures the financial security of a child in case of the sudden demise of the parent. In addition to maturity benefits, this plan also provides assured additions, bonus advantages, & partial withdrawals. These plans support parents to fulfil the child’s needs, such as schooling, college, career-related needs, etc.

• Growth-Focused Investment Plans

It is a plan based on ULIPs, where a part of the premium is allocated towards insurance & the remaining towards market-linked funds. It offers dual benefits of wealth creation & protection, where you can choose between debt, equity, or balanced funds. The choice of funds depends upon the risk tolerance level, & switching between the funds allows you to increase the returns. 

Benefits of Choosing a One-Time Investment Plan for Your Child

Provided are the benefits of choosing a one-time investment plan for your child:

• Simplified Investment Discipline

It is a simple to understand investment plan which involves a one-time payment without any multiple payments or frequent monitoring, where the corpus automatically builds over a period of time.

• Dual Advantage of Insurance & Investment

Under this plan, many options offer the dual benefit of life insurance & investment, providing financial protection to the family members along with wealth creation.

• Long-Term Wealth Creation

These investment plans are meant to offer high returns if left untouched for a longer duration, which can also be calculated with the help of the Child Education Planner. This is because the power of compounding lets the corpus funds grow your funds quickly.

• Tax Benefits

The premium paid towards the plan is exempt from tax u/s 80C of the Income Tax Act, 1961. Additionally, the maturity benefits received are exempt from tax u/s 10(10D) of the Income Tax Act.

• Flexibility

This plan offers flexibility in terms of switching between the funds depending on market fluctuations, which will help you align well with your financial objectives.

Conclusion

Every child in this world deserves a better & secure future. To accomplish this, parents look for growth & stability with the help of investments for their children. They should not only look for money, but also mental peace, assurance, confidence etc. in a one-time investment plan to fulfill the future financial objectives of your child.