Best alternatives to invest early in a child education plan while planning your retirement

The Economic Times has found that for parents, their children’s education remains the top spending priority^[3]. Other expenses keep shifting - saving for their child’s wedding is much less important in 2019 than it was in 2009. But there’s been a negative trend over the past decade: people’s retirement savings have slipped.

One can’t overemphasize the importance of retirement savings. In retirement, your income dries up while your lifestyle costs mostly remain the same. Other costs - like daily medicine, regular health checks - increase over time. Due to inflation, everything from essential items to luxury goods will cost more in your retirement.

In this light, people are very underprepared for their retirement. In India, 3 out of 4 people expect to lead a life of comfort once they retire. But only 1 out of 3 people are actually saving up for that^[4].

Sometimes, parents might further compromise their retirement savings to pay their kids' student loans. There are smarter ways to help your child pay for their education - like buying a child education plan for them before they turn 10. But first, let’s have a look at what can happen if your retirement funds run dry.

There are no grants or scholarships for retirement like there are for college. If your savings run short, there is no other way to replenish them except through joining the workforce again. That can be very undesirable for people who have gone through the office grind their whole life and are now looking for some down-time.

If not join the workforce again, insufficient retirement savings force people to depend on their kids in their old age. Thus, breaking your retirement pot to bail out your child from student loans can be counterproductive. You may think you have decreased their financial burden - but you have only pushed it into the future.

Improving Your Child’s Future without Hurting Yours

It’s important for your children to go to college, but without the right planning, retirement plans might be foiled. This is where child education plans come into the picture.

A child education plan is a hybrid between an insurance plan and an investment scheme. You pay regular premiums and at crucial educational milestones of their lives, your children can avail the money they need to afford the college they deserve. Child plans provide great value - the life cover received by your children can be more than 10 times the annual premium. Child plans ensure that your children don’t miss out on great universities only because of a lack of funds. They also ensure that your retirement plans are not disrupted by your child’s educational ambitions.

Child education plans come with flexible repayment options and are a great backup option in case your talented child gets selected for a prestigious, albeit expensive, university.

A survey by Economic Times revealed that 60% of Indian parents are concerned about the ever-rising costs of education^[5]. Are you one of them? Planning for your child’s future education beforehand with a child education plan goes a long way to decrease your worry.

College is a significant transition from childhood to adulthood. A phenomenon called college wage premium shows that those with a college degree consistently outearn those without it^[6]. Further, Brookings has reported that every additional year of college can decrease your mortality rate by nearly 20%^[7]. Going to college also boosts your ability to adapt to disruptions in the economy.

A child education plan makes it convenient for your children to enjoy the many rewards of a college degree. A child plan also lets you build your retirement nest egg in peace. A child education plan lets you juggle your retirement plans and your child’s education with grace.

Child Plans are also flexible. For instance, in the years when market returns are higher than normal, child plans allows you to redirect funds from the plan into stocks and equities. Everyone’s risk-appetite varies from time to time. So, when you’re looking to shift your investments into high-gear, child plans let you do it. The money in a child plan, then, is by no means frozen. Both partial withdrawals and strategic redirection of funds are allowed.

Planning ahead in various walks of life always pays off. Moreover, the life insurance plans available are plenty and diverse, so you can pick the one that suits your present needs and future goals. To learn about the Term Insurance options at your disposal, browse the website for various Term Plans offered by PNB MetLife.

[2] https://collegefundingexperts.com/blog/cost-of-college-currently-increases-8-times-faster-than-wages/
[3] https://economictimes.indiatimes.com/wealth/plan/financial-goals-are-changing-do-you-really-know-the-future-expenses-you-need-to-save-for/articleshow/71347114.cms?from=mdr
[4] https://m.economictimes.com/wealth/personal-finance-news/7-out-of-10-indians-expect-their-children-to-support-them-in-their-retirement-survey/amp_articleshow/65811259.cms
[5] https://www.policybazaar.com/life-insurance/child-plans/
[6] https://www.ncplanforcollege.org/8-reasons-why-college/
[7] https://www.brookings.edu/research/the-effect-of-college-education-on-mortality/