Education planning for newborn child

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The birth of a child brings immense joy and a profound sense of responsibility for parents. One of the most significant aspects of this responsibility is planning for the child’s future, particularly their education. With the rising costs of education and the unpredictability of life, it is crucial to have a robust financial plan that ensures the child’s educational needs are met, regardless of any eventualities. This article will explore how parents can secure their newborn’s future education through various strategies, including LIC’s insurance policies, and how these plans also offer benefits such as tax savings.

Importance of Early Financial Planning for Education

Education is one of the most valuable gifts parents can give their children. The costs of education, from primary school to higher education, have been steadily increasing. For instance, the cost of a college education has been growing at an average rate of about 6% per year. By planning early, parents can ensure that they have enough funds to cover these expenses when the time comes.

Early financial planning allows parents to take advantage of compounding interest, which can significantly grow their savings over time. Moreover, starting early gives parents more flexibility in choosing investment options that align with their risk tolerance and financial goals.

Higher Education and Beyond

Higher education, whether it’s a university degree or vocational training, is essential for children to gain the skills and knowledge needed to succeed in today’s competitive world. Additionally, some children may aspire to set up their own businesses, requiring initial capital and financial support. For many, marriage is another significant milestone that involves considerable expenses. Planning for these future needs is crucial.

Insurance as a Financial Tool

Insurance policies can play a pivotal role in securing funds for a child’s education and other future needs. They provide a dual benefit: protection against uncertainties and a disciplined savings mechanism. Life Insurance Corporation of India (LIC) offers several policies tailored to meet the financial needs of children’s education and future planning.

LIC Jeevan Tarun

LIC Jeevan Tarun is a popular plan designed specifically for children’s future needs. This policy offers a combination of savings and protection. It is tailored to meet the educational and other financial needs of growing children.

1. Features:
   • Flexible Payout Options: Parents can choose from various survival benefit options, which determine the percentage of the Sum Assured that is paid at different stages of the child’s age (20 to 24 years).
   • Maturity Benefit: The maturity benefit is paid when the child reaches 25 years, ensuring that a lump sum is available for higher education or other significant expenses.
   • Premium Waiver Benefit: In case of the unfortunate demise of the proposer (the parent), the future premiums are waved off, and the policy continues, ensuring that the child’s future is secured.
2. Benefits:
   • Financial Security: Ensures that the child’s education is not compromised even if the parent is no longer around.
   • Tax Savings: Premiums paid towards the policy are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.

LIC New Children Money-Back Policy

The LIC New Children Money-Back Policy is another excellent plan aimed at providing financial security for children. This policy is designed to cater to various financial needs at different stages of the child’s life.

1. Features:
   • Money-Back Benefits: The policy provides periodic payments (20% of the Sum Assured) at the ages of 18, 20, and 22 years, which can be used for education or other important milestones.
   • Maturity Benefit: On surviving the policy term, the remaining Sum Assured along with bonuses, is paid as a maturity benefit.
   • Death Benefit: In case of the demise of the proposer, a death benefit equal to the Sum Assured along with bonuses is paid to the nominee.
2. Benefits:
   • Regular Payouts: Helps in meeting education expenses or other financial needs during crucial years.
   • Tax Savings: Premiums paid are eligible for tax deductions under Section 80C.

LIC Jeevan Lakshya

The LIC Jeevan Lakshya policy is designed to provide financial protection and savings for the family, ensuring that the child’s education and other needs are taken care of.

1. Features:
   • Annual Income Benefit: In case of the death of the proposer, 10% of the Sum Assured is paid every year till the end of the policy term, ensuring regular income.
   • Maturity Benefit: At maturity, the Sum Assured along with bonuses is paid.
   • Premium Waiver: Future premiums are waived off in case of the proposer’s death, ensuring that the policy benefits continue.
2. Benefits:
   • Guaranteed Financial Support: Provides annual income to support ongoing education or other needs.
   • Tax Savings: Premiums paid qualify for tax deductions under Section 80C.

Unstoppable Education: Ensuring Continuity

One of the most critical aspects of these insurance policies is the premium waiver benefit. This feature ensures that in the event of the death of the proposer, the insurance company (LIC) will pay the remaining premiums, and the policy benefits will continue uninterrupted. This guarantees that the child’s education fund remains intact and grows as planned, providing unstoppable education for your children.

Example Scenario

Consider Mr. Sharma, who has a newborn daughter. He decides to invest in the LIC Jeevan Tarun policy with a Sum Assured of INR 10 lakhs. The premium payment term is 15 years.

1. Premium Payment:
   • Mr. Sharma pays an annual premium of approximately INR 65,000.
2. Survival Benefits:
   • At the age of 20, his daughter receives 20% of the Sum Assured (INR 2 lakhs).
   • At the age of 22, she receives another 20% (INR 2 lakhs).
   • At the age of 24, she receives another 20% (INR 2 lakhs).
3. Maturity Benefit:
   • At the age of 25, she receives the remaining 40% of the Sum Assured (INR 4 lakhs) along with accumulated bonuses.
4. In Case of Eventuality:
   • If Mr. Sharma passes away during the policy term, the future premiums are waived off.
   • His daughter continues to receive the survival benefits and the maturity benefit as planned.

Tax Benefits

Under Section 80C of the Income Tax Act, 1961, the premiums paid towards LIC policies are eligible for tax deductions up to INR 1.5 lakhs per annum. Additionally, the maturity proceeds and the death benefits received are also tax-free under Section 10(10D), provided the conditions specified in the section are met.

Investing in Mutual Funds for newborn child’s education

Planning for a child’s education and future needs requires a comprehensive approach that combines disciplined savings, protection against uncertainties, and tax efficiency. LIC’s insurance policies, such as Jeevan Tarun, New Children Money-Back Policy, and Jeevan Lakshya, offer robust solutions that ensure financial security and uninterrupted education for children. By starting early and choosing the right plans, parents can secure a bright and prosperous future for their children, even in their absence. These policies not only help in accumulating the necessary funds for education and other milestones but also provide peace of mind knowing that their child’s future is well-protected.

Investing in such policies is a step towards giving your child the gift of unstoppable education and a secure future, making sure they are well-prepared to face the world and achieve their dreams.

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