Best savings plan to protect your children’s future ?
Sukanya Samriddhi Yojana vs Child Insurance Plan : Which one is better to secure your child’s future ?: Providing a good education for children is the primary concern of parents. The high inflation rate adds to the concern in the education sector because parents need to be prepared with a savings so that their children do not miss out on a golden opportunity due to lack of funds.
Apart from education, marriage and accommodation are some other financial goals that require proper planning and investment.
To make the dreams of girls come true, it is also important to ensure financial security to ensure that the goals of the girl child are achieved despite the unfortunate premature death of the earning parents.
Here are the pros and cons of investing in the Sukanya Samriti Yojana (SSY) and child insurance schemes to protect your child’s future:
Sukanya Samriti Yojana
The parents or legal guardian of a girl child can open a Sukanya Samriti Yojana account until the girl is 10 years old.
Benefits:
With a sovereign guarantee, SSY is completely risk free and offers a more attractive interest rate than the rates offered in the General Provident Fund (PPF).
The maturity period of SSY is 21 years and the deposit is 15 years. The girl child is allowed to partially withdraw 50 per cent of the outstanding account balance when she reaches the age of 18, which can be used for education expenses.
Even if the maturity period is 21 years, if the beneficiary gets married after the girl child reaches the age of 18, an SSY account can be closed in advance and the full balance can be withdrawn.
Investments in SSY accounts receive 80C tax benefits, with interest and maturity amounts completely tax deductible.
Limitations:
SSY accounts can only be opened for girls. Therefore, for boys, parents should choose other investment avenues.
If the interest rate is adjusted quarterly, the maturity amount may decrease in the event of a reduction in the interest rate.
If the earning parent dies, investments in SSY will be halted, thus tracking the goals of the girl child who will benefit.
Child insurance plans
Like SSY, children’s insurance plans are aimed at meeting the financial needs of children for higher education and marriage.
Benefits:
Child insurance plans usually come with a premium discount benefit (PWB) option, which ensures that the policy continues without premium in the event of the unfortunate death of the earning parent.
Such an insurance plan can be taken for girls and boys.
Parents have the flexibility to choose the maturity period and can sometimes choose the method and duration of the refund.
Like SSY, investments in child insurance plans receive 80C tax benefits and are also tax deductible for maturity and refunds.
Limitations:
With a lower bonus rate, parents will have to opt for a higher sum insured (SA) to meet their financial needs, which will lead to higher premium payments.
Which to choose?
With sovereign guarantees, attractive returns and full tax breaks, SSY is a good investment option that is risk free for women.
Problems can arise if the parent earning an return on investment in SSY unfortunately dies prematurely, so it is necessary to take out insurance.
However, instead of the relatively expensive child insurance plans, parents can opt for a mutual fund (MF) or other high-yielding investment plans or cheaper term insurance plans.
