CHILD PLAN/ or Alternatives

POSTED BY me.finanz ON June 23, 2012 2:21 pm COMMENTS (10)

Hello readers,
Your views/ suggestions on child plans or other investment option for the future of our 4 month girl and another we may plan to have in 2-3 yrs. Investment time frame: 15 yrs approx.

a. Is CHILD plan the only way to invest. What are its pro and cons in terms of charges/ taxes/ returns, etc
b. Can we invest in something else which is equally if not better reliable in terms of better returns.
c. What is the merit in the alternative plans.


10 replies on this article “CHILD PLAN/ or Alternatives”

  1. says:

    Thanks Manickkam. This time, my queries begin with a “what”
    a. What is a liquid fund.
    b. What terms insurance would you suggest. What do these do and what are its overall benefits.

    Just so that I understand, how do Child plans charge?

    Let me know, Rajiv

    1. Dear Rajiv, Why part is over. so here is answer for your what part –

      A liquid fund is a debt based MF where the underlying assets are debt papers of ultra short term maturity. The redemption is T+1 day directly into your bank account. On taxation front, the dividend option is better for 30% tax slab people.

      Term insurance is to protect the financial risk of your family members arising due to your sudden death. There are 2 variants now a days in the market offline plans to be purchased from the agents of the insurer & online plans to be purchased directly from the insurer. The Prem. is far cheaper for online plans. if you survived the term, you ‘ll not get any maturity benefit as return from this term insurance.



    2. BRSINGH says:

      Term insurance is purest form of life insurance where you do not get any return (just like your motor bike insurance which does not give any return). To me its the actual life insurance which covers only life. Good thing is that they are very cheap and gives huge cover. I have taken Bharati AXA term insurance.

      Don’t look at the charges of child plan. Please look at the returns which is really bad as compared to MF or any other form of investment. Instead of child plan get a term insurance and keep all the money in fixed deposit or recurring deposit and the return will be more than child plan. Also if you die unfortunately then term insurance will provide very good cover money which a child plan do not give.

      Please read few articles about term insurance and learn what are its advantages. Also check why LIC policy and child plans are bad. There are many articles available if you search in google.

  2. manickkam says:

    Hi Me.Finanz,

    Have one thing very clear. Insurance and Investment are meant to be separate and should be separate.

    On the why part, all the child plans also have charges towards giving you insurance cover and getting returns from either market (ULIP plans) or through safe avenues (Endowment plans).

    So, comparably, its always better to invest in investment avenues like PPF (long term, secure) or Mutual funds (long/short term, liquid, with risk from market) and have a insurance cover as a term insurance.


  3. Jig says:

    I dont know the exact answer of your ques but i would like to provide the literature by reading which you can take your own decision that what not to do and what to do. Also why you should do that.
    First of all a very good blog that you must read

    Second , Same kind of blog is available on JI blogs. You can search.

    Third You just click on the MOST RESPONSES tab on TOP of this page. YOu will find First Query, CHILD PLAN. WHY NOT? that is very good informative que /ans on the same topic.

    Still if you need more info, Many professional writer books are available for financial planning. That also discussed on this forum earlier. You just search and find lot.


  4. Jig says:

    I dont prefer to direct provide solution but i would sure like to provide literature to read and then you should yourself decide what to do and what not to do. Also you will get info on why you should do that.
    First a very good blog by Mr BFA

    Second on the this forum ( JagoInvestor ) you will find the same kind article by Dear Manish

    third on this forum you will find lot lot discussion on the same topic. One of the good & informative discussion in details http://localhost/jagoforum2/child-plan-why-not/279/

    well these are good food to digest first and then you can go with professional writer book if still you will have confusion about planning.


  5. says:

    Thanks Ashal,
    My aim here is to understand why NOT child plans? Why are you against it?
    I have some investments going in what you have suggested, how would this help that a child plan would not.

    Also why a term plan.

    Pardon me for delving deeper, but my aim in posting the query here is to get clear clarification and understanding of why do this and not do that. The response to the WHYs form a major part of my financial decision making.

    Thanks, Rajiv

    1. BRSINGH says:

      I completely agree with Ashal.

    2. BRSINGH says:

      I completely agree with Ashal. LIC plan, child plan, etc are simply crap. Term plans are really cheap and the cover is huge. I have a term plan from Bharati AXA of primimum 10K per annum and the cover is 1cr. My age is 35 and the policy duration is 25 year. If you buy and any insurance plan and pay 1L premium still you can not get this cover. Now assume that you can invest 1L per annum. Give a premium of around 10K on a term plan and get a huge cover. Now rest 90K do a FD at 9% and the return is much more than child plan or Lic endowment plan. If you invest in debt or balanced mutual fund the return is around 12%. If you can take little bit risk and invest in large cap mutual like HDFC TOP 200 the return is around 22-25%. But investment in MF should for long term. After paying LIC premimum of 85K per annum i realised how stupid i was.

  6. Dear me.finanz, please purchase a term plan for yourself of at least 10-15 times of your yly income.

    Please invest for your child in PPF, MFs, bank FDs & other plain investments but never in a child insurance plan.



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