Home/ Money / Personal Finance/  Why you should not mix insurance with investment while investing for girl child?

I am 34 years old working with Private sector. I have a 3 year old daughter. I am planning to invest in a Child Plan of an insurance company, where the money is paid back in installments at different dates to take care of her education and marriage needs. Please advise whether I should buy the child plan if not please suggest me where should I invest the money?.

Answer: As a prudent personal financial principle one should never mix insurance and investment needs by buying single product to take care of both such needs. I would not advise you to buy any insurance plan as an investment option for your daughter’s education and marriage goals, as these insurance products are loaded with high irrecoverable charges. Just because a product has “child" word in its name does not mean that it is a suitable product for your child. Instead I would suggest you to buy adequate term life insurance, preferably online and invest in mutual funds through monthly SIPs in equity mutual funds. As far as the amount of life insurance cover needed for this purpose is concerned you will have to estimate your future goal value at the time of her education and marriage after taking into account inflation.

Taking into account the fact that your goal is at least 15-18 years away, you should invest monthly through SIP route in nifty 50 or Sensex fund. If you are not comfortable investing in equity, you can open an account under Sukanya Samriddhi Scheme in the name of your daughter which offers you higher rate of interest and tax benefits too under section 80C.

The term plan will take care of her education and marriage needs in case you are not around. The combination of term plan and monthly SIP/deposit in Sukanya Samriddhi Scheme will certainly beat the amount which you would get under any child plan. Consult a Certified Financial Planner to build a proper financial plan for all your goals.

(Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his twitter handle)

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Updated: 22 Mar 2023, 02:36 PM IST
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