FD Child Plan vs Child Insurance Saving Plan: Which Is Better & Why?

Confused whether to opt for a fixed deposit for child or insurance? Read on to know more and clear your thoughts!

A Marketing Executive by profession always wanted to make his little son, Abhishek financially independent. He has some amount which he wanted to invest for the financial independence of his child in future.

However, he was a bit confused when it came to choosing between a fixed deposit for child and child insurance.

FD Child Plan vs Child Insurance Saving Plan: Which Is Better & Why?

If you are confused like Abhilash, let’s provide you some points that you should consider to make things clearer.

  • Financial motives

Different people may have varied financial missions to accomplish. Investing in a fixed deposit for child scheme to a person like Abhilash may give him enough time to get more out of his FD (Fixed Deposit) investment for the education expenses of his child. Since fixed deposits always offer fixed returns, it can offer a sure-shot benefit on maturity. On the other hand, child insurance may provide protection, but no ROI on investment – yes, some are there that offers returns, but it’s not fixed as they are market driven. Thus, once your motive of investment is clear – whether you want protection or a fixed ROI is what determines your investment tool.

  • Income

Once you keep money in a fixed deposit for child, you could be sure to receive a fixed amount after its maturity. Leading online lenders offers you a good interest returns on your investment. Hence, investing in a fixed deposit for child helps you guaranteed income when compared to life insurance plans which mostly does not. To derive such facilities from a life insurance plan for child, you will need to invest in money-back policies  

  • Withdrawals

When you invest some amount in an investment schem

e be it a child FD or a senior citizen fixed deposit, some liquidity is a welcome thing! Both fixed deposits as well as life insurance helps you withdraw money before the completion of the tenor. However, when it comes to FDs, you can also make premature withdrawals, in life insurance, you need to surrender the policy. Premature withdrawals on FD may attract some penalty which you should consult contacting your lender or bank.

  • Minimum investment amount

Starting from Rs.500 (for banks and many more financial institutes – may go up as well), a fixed deposit scheme lets you put down minimum investment. Although you may open an FD for a child, opening a child life insurance may be determined by age, gender, and plans. Based on these elements, the premiums may be calculated which may be more than your financial capacity to put down at once.

The Bottom Line    

A fixed deposit for children is an economical scheme which offers multiple benefits such as lower starting amount, premature withdrawals, and sure-shot interest gains. Child life insurance offers protection to the child within a tenor, but its premium may not be affordable for everyone. Thus, before investing in a fixed deposit for child or child insurance, you should evaluate the purpose and goal to derive the best for your child.

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