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Protect Your Child’s Future while Saving Tax

The mature urban Indian householder knows that to meet the rising expenses of bringing up a child needs disciplined savings. Just having an FD or RD is never going to be enough. According to a study by ET Wealth in 2011, it costs about ₹54.75 lakhs to raise a child from birth until s/he is 21 years of age. Factoring in inflation, if your child is born in 2015, this figure will easily touch ₹75 lakhs. If s/he is born in 2020, we are looking at 1+ crore. And this is for a single child, mind you.

Let’s see some realistic child education expenses:

  • Education at any decent school costs Rs 25,000 a month today, and will cost close to Rs 50,000 a month by 2030.
  • A good 4-year Engineering program costs close to Rs 12 lakhs today, and will cost close to Rs 25 lakhs by 2030.
  • A reputed B-School charges around Rs 20 lakhs for a 2-year MBA. By 2030, the same will cost Rs 45 lakhs.

This is only for education and only for a single child. You need to ask yourself how prepared you are to meet these steep demands. In addition to these costs are the costs of the upkeep of your child:

And in the middle of all this, say something happens to you. What provision do you have in place to take care of your child’s education? Any delay in child education planning will be detrimental for your child’s future. The OneInsure Research Desk strongly suggests that you begin child education planning in the early years of marriage.

With a child plan, you can be rest assured that the education cost of your child is taken care of. With a small investment of Rs 8,000 – 9,000 a month in a child plan, you can avail a maximum of Rs 21 – 22 lakhs to meet the rising education cost at different intervals of your child’s education.

Some new-age plans come with the money-back option, where the insurance company would pay around 20% of the sum assured when s/he turns 18 years of age, another 20% after two years, and so on. You can also opt for endowment policies, where a lump sum amount is paid at maturity along with bonuses.

One of the benefits of child insurance plans is its waiver-of-premium feature. If the policyholder (parent) were to pass away, all the future premiums will be taken care of by the insurance company and the cover will continue to be active.

How Does a Child Plan Save Tax?

Investments made under a child plan are Section 80(C) compliant. This means that you can claim tax exemptions up to Rs 1,50,000 when you invest in a child plan. Along with taking care of your child’s education and other major expenses, a child plan ensures your hard-earned money is saved too – a win-win situation.

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