Child Savings Plans And Insurance: How to Secure Your Children’s Well Being

A fundamental aspect of a parent’s financial plan is saving and investing for their children’s future. Many parents begin preparing for their children’s expenses and make various investments to fund significant events and milestones, like their children’s educational pursuits.

For example, consider a child who is about to embark on their tertiary studies. A degree from a private university can cost a hefty amount and without prior planning, parents may not be able to afford it. The cost will only increase if a child wants to pursue his or her studies overseas.

As such, parents and caregivers need to be several steps ahead and have a plan for their children’s well being. Child savings plans and insurance are two straightforward ways to do so.

Why is it important to save for your children?

Parents always want the best for their children and are keen on providing well to ensure their stable future. However, inflation has increased daily living expenses, like fuel, housing, clothing, food, and healthcare.

With the rising cost of inflation, future generations will have to face the challenge of supporting the demands of their lifestyles. By making wise investments and planning for their children’s future, parents can see children reach their full potential and support their dreams.

Also, by having sufficient funds to support children, parents can protect and cover the costs of any emergencies that their children may face. Ultimately, financial planning serves as a safety blanket for children till they grow up, become independent, and start saving money and funding their own lives.

How do child savings plans work?

If a parent has purchased and invested in a child savings plan to save for the child’s future, the maturity amount can be taken out and used once the policy term has ended. Should an emergency or unfortunate event occur in the parent’s life, the claim amount can be used to ensure that the child can continue with their current standard of living and are financially secure.

Benefits of a child savings plan

Many parents are concerned about their children’s future and want the comfort of knowing that they have sufficient funds to support their children’s lives. With a child savings plan, parents can be confident in their finances and investments and would not have to worry if they have accumulated enough money.

Here are some benefits of investing money into a child savings plan.

Education

Education, specifically tertiary education, is a costly journey. This is because students need to cover the cost of educational expenses, like tuition fees and other payments, while being able to handle the cost of living.

Without proper planning, there could be a lot of stress and anxiety during a child’s transition from secondary to tertiary education. Having a child savings plan allows for investments to be made directly from the onset to support a child’s education.

Insurance for emergencies

When an emergency or unfortunate event occurs, it often causes a financial strain or burden on those who have to pay for the costs of such incidents. A child savings plan is an insurance, which parents can utilise to pay for emergencies or accidents concerning their children.

Teaches your child to save

Children often learn from the examples of their parent’s actions rather than words. This means that the investments parents make in various plans can teach children the importance of saving money.

When children see how their parents are investing and saving money for future use, they will learn the value of money. Seeing parents make wise financial decisions also supports the development of discipline and self-control in terms of their money usage as they grow older.

Tax benefits

Parents who invest in a child savings plan are eligible for tax benefits. The insured parent can claim tax exemptions, which will reduce the final payable tax amount and not affect their current financial status.

Finances for significant life milestones

Most child savings plans allow partial withdrawals, allowing parents to pay for short- to medium-term financial requirements. This is beneficial when a child reaches significant life milestones, like completing high school, gaining admission into college, or involving themselves in competitive entrance exams. Being able to finance those milestones means that a child’s educational needs can be satisfied without experiencing a financial burden.

Early retirement for parents

A child savings plan can help reduce parents’ financial responsibility at an old age. Having lesser requirements in the future means that parents can avail early retirement or would not have to work post-retirement to support their children. This means parents can plan for retirement while ensuring their children’s secure future.

Various insurance plans to invest for your children

Raising a child from birth to the time they have secured a job and can financially support themselves can be expensive. However, various insurance plans can support parents as they save for their child’s future and alleviate any financial burden.

Pregnancy insurance

Prenatal or pregnancy insurance protects mother and child throughout pregnancy until the child turns five. This insurance supports the cost of pregnancy complications, the death of a mother or infant, and admission into an intensive care or high-dependency unit. It provides a lump sum payout for a diagnosis or hospitalisation of infectious diseases.

Visit Prudential’s website to learn more about the Mom and Baby Care.

Education insurance

It is never too early for parents to begin saving for their child’s future educational pursuits. Investing in education is the most valuable gift parents can give to their children. This is because it opens the doors for children to gain experiences, learn lessons, and explore opportunities to develop their passions and secure the future.

Here at Prudential, we have a PRUSaver Kid insurance plan that can aid parents in growing their children’s savings. The benefits include payout at any point of the child’s tertiary education, and flexibility to decide which funds to invest.

Health insurance

There are also some child savings plans which cover children up to the age of their adulthood. Such plans provide comprehensive protection for both the mother and the unborn baby throughout pregnancy until the child is an adult.

An example of such a plan is the PRUMy Child Plus at Prudential, where there is prenatal coverage, coverage for critical illnesses from childhood up to age 25, education fund investments, and extra coverage.

Why save up for my child’s education with insurance?

When it comes to saving for a child’s education, many parents tend to overlook the possibility of doing so via an insurance plan and instead turn to child savings accounts at banks or their own investments.

While saving in a bank guarantees that the money is kept safe, it may not necessarily be sufficient to keep up with rising tuition fees. Additionally, personal investments do not assure an investment return, meaning that the child’s education fund is not guaranteed.

Here are some reasons to save for a child’s education via insurance.

It is low risk

Any investment comes with a risk of losing money, and some products like Shares, Unit Trusts and ETFs are not capital-guaranteed. Parents never want to be faced with having insufficient funds to support their children’s education, so it is crucial to have an investment or savings instrument that is capital-guaranteed.

This is found in various insurance products that are meant for savings and are capital-guaranteed upon maturity. Also, insurance savings plans provide a higher yield than typical bank savings because of the length of the plan.

Continuous savings

Parents who invest in their child’s savings account for their child’s education are at risk of losing some income. This is because the child’s education fund in a bank savings account or other regular investments stops growing, as stated in the program, if the parent is no longer able to pour any money into the fund.

Should an unfortunate event happen to a parent, like their demise, a disability, or diagnosis of a critical illness, the bank savings account and investments are compromised at the expense of the parent’s livelihood. Through insurance, a child savings plan can support the child’s education fund and protect the fund.

Relevant for single parents

As mentioned above, child savings plans offer the benefit of future premiums being waived should a parent pass away, face a disability, or get diagnosed with a critical illness. This protection element is valuable for families with a sole breadwinner or a single parent because if anything should happen to them, the insurance plan still continues for their child.

How to start a child savings plan?

A child savings plan can be started at any insurance company of your choice. However, it is important to find an insurance company that meets your needs and can offer the best possible insurance plan to support your children’s future.

Get in contact with the insurance company, and they will provide you with comprehensive information on starting a child savings plan.

Tips to save for your child’s future

Here are some tips on saving money for a child’s future:

Start as soon as possible

The sooner parents invest in their child’s future, the more money they can save. This is because being involved in insurance plans for a longer term means that parents can earn better returns.

Be consistent

It is best for parents to deposit amounts into the insurance plan whenever possible and not wait to invest only upon accumulating a large sum of money. When parents gather money little by little, the original amount of money poured in grows over time.

Look for plans that have added benefits

When opting for insurance plans, it is best to look for plans that offer additional benefits, like bonuses, which can enhance overall earnings.

Keep to your budget

The amount of money being invested into a child savings plan should meet the needs and demands of your budget. If you exceed the budget, there is the possibility of compromising on the child’s fund or not being able to save money regularly.

Review your plan once in a while

Certain factors of an insurance plan may change over time, so it is vital for parents to check their plans and update according to the latest developments. Reviewing the investment strategy ensures that parents fully understand the components of the plan and will not be met with any unfavourable surprises when the payout time draws close.

Where to get a savings plan and insurance for my child?

 Prudential offers a diverse range of savings plans catered to your child and any specific needs.

Visit our website to learn more about the many plans we offer, and contact us or any of our Wealth Planners to discuss the best policy for you.

Conclusion

Saving up for the future of a child is the priority for many parents. Those funds can be used to support the many milestones of a child, like their educational pursuits and weddings. Overall, insurance plans are valuable because of their coverage and the many benefits offered.