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Which is better for your child – child plans or mutual funds?

Nov 13, 2019 | 8 months ago | Read Time: 3 minutes | By iKnowledge Team

In today’s world when inflation is at an all-time high, it becomes very important to plan for your child’s future. Education costs are increasing at an alarming rate; therefore, you need to park your money in a good child education plan to help your children chase their dreams.

When you want to set aside money every month to meet the education, marriage or other expenses of your child, you will encounter two options – child plans and mutual funds. It is quite natural to be confused as to which one would benefit you the most.

A child plan is always better than a mutual fund when you are planning for your child’s future. The performance of mutual funds is entirely dependent on the performance of the stock market, the performance of the fund drops and your investment in it takes a severe hit.

Child insurance plans not only encourage you to save diligently, but also give your child the benefit of insurance, in the event of your untimely death. A child insurance plan is the perfect safety net for your child, because of the following reasons:

  • Perfect for financial commitments at various stages

When your child turns 18, he/she may become independent. Until then, your child needs financial security. Child insurance plans help you with the flexibility of investing various amounts of premium to meet the commitments at the different stages in your child’s life such as higher studies, moving abroad for studies, marriage, etc. At the time of maturity, you will get a lump sum pay out, which will help you meet financial commitments with ease.

  • Chooses portfolios based on your risk appetite

A child insurance plan is the best investment plan for your kid’s future. This is because the premiums that you pay towards this plan are safely invested in ULIPs (unit-linked insurance plans). Based on your risk appetite, your insurance company invests the premium in equity completely, in debt funds completely and in a mix of equity and debt funds You can take the help of an online child plan calculator to arrive at your savings amount.

Life is unpredictable, isn’t it? So, Aegon Life will continue to provide full benefits to your child, through this policy, even if you don’t outlive the policy term. The premium that you pay for this policy is invested in well-balanced funds that are automatically reviewed frequently, thereby maintaining a highly dynamic portfolio always.

  • Premium Waiver Benefit

We believe this is the best reason why a child plan is always better for securing your child’s future. In a mutual fund, when the investor passes away during the tenure of the fund, the nominee (child) receives a lump sum amount as death benefit. This is the end of the relationship between the fund and the child.

However, in the case of a child insurance plan, when the policy holder passes away within the policy tenure, the plan doesn’t end. The insurance company waives off all the remaining premiums. The child needn’t suffer in the case of his/her parent’s untimely death. In the above example, Aegon continues to pay premiums on behalf of the policy holder till the end of the tenure so that the child receives dual maturity benefits – one at the time of death of the parent and the other at the end of the tenure.

  • Partial withdrawals

In a mutual fund, it is impossible to withdraw your funds partially. The lock-in-period concept doesn’t allow for easy withdrawals. On the contrary, most of the child plans give you the flexibility to withdraw funds whenever you need, if the requirement is related to your child. Before opting for a child insurance plan, it is always better to check for its lock-in period, with your service provider to get more clarity.

To give your child the comfortable financial future that he/she deserves, choose a good child plan right away. This way, your child gets full coverage, even when you are not around to take care of him/her. To know about Aegon Life’s life insurance products like term insurance and other products, visit our home page.


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