Best Children Education Plans in India for Investment in 2024

India’s education inflation rate rose to 4.81% in June 2023. And this figure is ever-increasing. Securing your child’s future is more challenging now than ever. 

You can choose the best investment plan for a child’s education in India from various options. This must be done considering your child’s future endeavours and ambitions. Assessing your financial abilities and how much you can set aside to invest is also something you must consider.

This blog will provide step-by-step guidance on planning for your child’s education and looks at the best investment plans for a child’s education among the ones available in India. Make your choice after comparing their benefits, application, process, and other related details. 

What is a Children Education Plan?

Children Education plans are insurance plans targeted at parents who aim to fund their child’s educational expenses. Insurance companies mainly offer these investment plans.

A part of Children Education investment schemes offers life insurance coverage, and the remaining amount is invested into debt and equity instruments to save money for children’s higher education.

A Step-by-Step Plan for Children’s Education 

Before you read this guide, you need to keep a few things in mind. The earlier you start saving for your children’s education, the better. To prepare an effective plan, you need to decide on your monthly budget, as it clearly shows how much you need to save every month to meet your financial goals.

With that in mind, let’s get started. Below is a guide you can consult for laying out a plan for your children’s education:

Step 1: Decide on a Time Horizon

To decide on the time horizon, calculate the years left for your children for graduation and post-graduation. A longer time frame will enable you to save more, so it is advisable to start planning and investing as early as possible.

Step 2: Estimate the Cost of Education

Next, you need to consider the cost of education, depending on whether you wish to send your children abroad for higher education or keep them in India.

Another crucial factor that must be considered is whether there are good educational institutions in India for the particular discipline your child wishes to pursue. The third factor is whether your child will pursue only post-graduation courses abroad. You need to build a larger corpus if you want them to pursue their degrees abroad, graduation or post-graduation.

You must remember that the future cost of higher education and additional expenses will likely be higher due to inflation. For example, suppose a business school charges ₹20 lakhs for a course. With 12% annual inflation, the fees will increase to ₹35,24,638 after 5 years.

You will need to pay ₹15,24,683 more for your children’s education. To account for this price increase, you will have to save approximately ₹3.04 lakh per year to get to that amount.

Step 3: Assess Your Financial Condition 

Before you choose an investment plan to build a corpus for your children’s education, you must consider all your current financial liabilities and assets. Analyse whether you have any assets to contribute to the education fund.

Moreover, if you have to pay EMIs for home or car loans, you need to prepare a financial plan to see how much you can save after fulfilling your repayment obligations. Proper budgeting will help you cut unnecessary expenses and allocate funds to meet your goals.

Step 4: Decide on the Amount You Can Save Now

Next, you need to figure out how much you save every month to build a corpus for your children’s higher education. While opening an RD (Recurring Deposit) account in a bank is a good idea, you can also choose to invest in a mutual fund via a SIP (Systematic Investment Plan). The underlying concept is to save in a disciplined way to meet the ultimate goal.

If you feel that your savings are insufficient, you can allocate more of your income to your children’s education plan. You can also reduce unnecessary personal and household expenses or find additional sources of income.

Step 5: Plan Your Investments 

Creating separate portfolios for children’s education facilitates better management of funds. Choose equity-oriented mutual funds with a mix of large-cap and mid-cap mutual funds. ELSS (Equity Linked Savings Schemes) is an excellent option for long-term investment goals and provides tax benefits.

When your child receives cash as gifts from relatives, you can add the amount to the schemes. You can redeem some units for their educational needs as and when required and keep the investment going.

Best Investment Options for Child Education

Here are a few schemes from which you can choose the best investment plan for a child’s education per your budget and your child’s future goals.

SBI Life – Smart Champ Education

Benefits of the Plan

Following are the benefits of the SBI Life- Smart Champ Education plan:

• As soon as the child reaches the age of 18 years, this investment plan for the child’s education offers 25% of the sum assured as the Smart Benefits along with the bonuses. This benefit is given to the child annually till they reach 21 years of age.
• The plan also offers death benefits in the event of the policyholder’s death. Here, the child will receive the death benefit if they are 18; otherwise, the nominee will receive the sum.
• You can opt to get the future due instalments as a lump sum amount, but this will be discounted at a rate of 6.25% per annum.

Eligibility Criteria

The eligibility criteria for the SBI Life Smart Champ education plan comprise the following:

• Minimum entry age for policyholders: 21 years.
• Maximum entry age for policyholders: 50 years.
• Minimum entry age for children: 0 years.
• Maximum entry age for children: 13 years.

How to Apply

Follow the steps given below to apply for the SBI Life Smart Champ Education plan:

• Go to the online portal for the plan and download the application form.
• Fill in the form and attach the required documents.
• Select your preferred tenure and sum assured as per the plan.
• Make payments for the first premium through an online transaction.
• Collect all the policy details on your email ID.

Aditya Birla Sun Life Vision Star Child Plan

Benefits of the Plan

The following are the benefits of the plan:

• The policyholder will receive the maturity benefits at the end of the policy term, including the accrued and terminal bonuses.
• In the event of the policyholder’s death, the child or the nominee will receive the death benefit as the sum assured, along with a significant premium.
• The plan also offers tax benefits under Section 80C and Section 10 (10D) of the Income Tax Act 1961.

Eligibility Criteria

The following are the eligibility criteria for the plan:

• Minimum entry age for policyholders: 18 years.
• Maximum entry age for policyholders: 55 years.

How to Apply

Follow the steps given below to apply for the plan:

• Go to the plan’s online portal and choose your preferred sum assured.
• Choose your desired policy tenure and fill in the application form.
• Upload the required documents.
• Make the payments for the premium.
• Collect policy details on your email ID.

Bajaj Allianz Young Assurance Child Plan

Benefits of the Plan

The following are the benefits of the plan:

• The plan provides death and maturity benefits to the nominee (child).
• The plan offers a selection of riders for additional cover.
• You can claim discounts on your premium.
• The plan provides all policyholders with a grace period and a free look period.
• Along with the ones mentioned above, the policyholders also enjoy tax benefits under this education plan.

Eligibility Criteria

The eligibility criteria for the plan are as follows:

• Minimum entry age: 18/50 years. 
• Maximum entry age: 28/60 years.

How to Apply

You can apply for the scheme online or offline by visiting the Bajaj Allianz online portal or branch office. You can get the details of every scheme and select the one suited to you. Then make payments and submit documents.

HDFC Life Young Star Udaan

Benefits of the Plan

The following are the benefits of the plan:

• The best child education investment plan offers additional earnings in the form of accrued bonuses for the first five years of the policy term.
• The policyholder will receive maturity benefits in a lump sum form at the end of the policy term.
• In the final five years of the policy term, the policyholder will receive money-back benefits from the plan.
• Tax benefits as per Section 80 C and Section 10 (10D) will be offered under the Income Tax Act, 1961.

Eligibility Criteria

The following eligibility criteria must be followed for the plan:

• Minimum entry age: Eight years.
• Maximum entry age: 60 years.

How to Apply

Go to the official website for HDFC child plans and select your desired scheme. Then, fill out the application form accurately and submit the documents properly. Then, if required, pay the first premium and collect all the paperwork digitally.

LIC New Children’s Money Back Plan

Benefits of the Plan

The following are the benefits of the plan:

• Maturity benefits, along with accrued bonuses, at the end of the policy term.
• The death benefit in the event of the policyholder’s death.
• Money-back benefits to the policyholder or the nominee.

Eligibility Criteria

The age eligibility criteria for the plan are as follows:

• Minimum entry age for the child: 0 years.
• Maximum entry age for the child: 12 years.

How to Apply

You can visit the Life Insurance Corporation online portal and select the plan as per your requirement. The documents will be uploaded online, and the payments will be made via digital transactions.

Benefits of Children Education Plan

You will enjoy the following benefits by choosing an investment plan for child education in India:

• Child investment plans help the parent secure their child’s future against financial uncertainties.
• Child’s educational needs are taken care of if they have a corpus of funds available at their disposal.
• Even if the parents and guardians of the child pass away unexpectedly, the investment plan will take care of the child’s financial needs.
• Tax benefits prescribed by the government help the policyholders to save more in the form of deductions.

Other Crucial Tips to Keep in Mind

Given below are the crucial tips you should keep in mind concerning planning for your child’s education:

• You could be tempted to liquidate your investments in a financial emergency unless you opt for investment schemes without early payout options and strict lock-in periods.
• Adopting a step-up investment approach lets you allocate more funds with increased income. It ensures you benefit from compounding and helps you counter inflation successfully.
• If you are the sole breadwinner of your family, buying a suitable insurance policy will secure your family’s future. The insurance payout can contribute to your children’s education fund.
• If you have invested in equity funds for your children’s education, consider de-risking the funds by shifting from equity to less volatile debt securities a few years before attaining the financial goal.

Final Word

It is said that planning is the key to success, and it is no different when making a plan for children’s education. While education loans are always a viable option, following a well-planned investment strategy for children’s education will allow them to be debt-free and provide greater satisfaction to parents. With the help of the plans mentioned above, choose the one that suits your and your child’s needs.

Frequently Asked Questions