With inflation touching sky highs, children's education is a concern. Parents must secure their children financially so they can take advantage of opportunities in case of a shortage of funds.
 

Giving your children the gift of a good education is the best investment. However, with the increase in higher education rates, this is becoming difficult to afford. Apart from education, marriage and other financial goals for children require proper planning and investments.
 

It is important to ensure financial security to fulfil your child's dream. Investing for children ensures they are financially secure even in the event of the death of the earning parent. But with Sukanya Samriddhi Yojana and Child Insurance Plans emerging as contending options, which one should you invest in? Let’s find out through this blog.

 

What are Child Insurance Plans?

A child insurance plan offers the double benefit of savings and insurance. These insurance plans help ensure a financially secure future for your children. Since this is a life insurance policy, even the parent will be covered under the policy. In the event of the demise of the life assured during the policy term, an amount assured will be provided to the nominee. The nominee is the assured person's child in this case.
 

If the child is under eighteen, the sum as a payout is provided to the nominee. With such insurance plans, one can ensure their child has adequate financial support. You can use this investment from the child insurance plan to finance your children's higher education or marriage. It can also be used to support their entrepreneurial dreams.

 

What is Sukanya Samriddhi Yojana?

Sukanya Samriddhi Yojana is a government-backed investment scheme that is under the umbrella of the Beti Bachao, Beti Padhao program. It provides an account for the parents of the girl child to secure their child's future expenses. A parent or guardian of the girl child below ten can initiate it.
 

The Sukanya Yojana has a term of 21 years. Or until the girl child gets married after the age of eighteen. The annual interest rate for this scheme for Q2 of 2023-24 was 8%. One can calculate the interest rate and final amount to be obtained on this scheme using a Sukanya Samriddhi Yojana calculator, also known as the SSY calculator.

 

The pros and cons of investing in Sukanya Samridhi Yojana and Child Insurance plans

For those looking for investment plans for their children, weighing the pros and cons of investing in the Sukanya Yojana and Child Insurance Plans is important.
 

Sukanya Samriddhi Yojana
 

Offering high interest rates, the Sukanya Samriddhi Yojana is a beneficial government scheme. Its interest and maturity amount can be calculated using the Sukanya Samriddhi Yojana or SSY calculator.
 

• Pros

The parents or legal guardians of the girl child may open a Sukanya Samriddhi Yojana account for a girl child under the age of 10 years. These are its benefits:
 

The Sukanya Samriddhi Yojana offers a sovereign guarantee. It is a risk-free scheme and offers an attractive, higher interest rate. The Sukanya Samridhi Yojana interest rate is higher than the Public Provident Funds.
 

Secondly, the maturity period of an SSY scheme is 21 years. One can make deposits for up to 15 years with a partial withdrawal of 50% of the outstanding account balance. This withdrawal is possible when the girl child attains the age of 18 years, and this fund is to be used for her higher education.
 

The scheme allows for the premature closing of the SSY account. The entire balance of the same can be withdrawn if the girl child gets married after attaining the age of 18 years. 
 

Investments made toward the SSY account enjoy tax benefits under Section 80C. The interest and maturity amount under this scheme is exempted from tax.
 

• Cons

Unlike Child Insurance Plans, Sukanya Samriddhi Yojana is available only for girls. Parents of male children must select other investment schemes as this is not available for boys.
 

With the rate of interest revised quarterly, the maturity amount can fall short in case of rate cuts.
 

In the case of the demise of an earning parent or guardian, investments to the SSY account will be stopped. This will have an impact on the finances of the beneficiary girl child.

 

Child Insurance Plans
 

Just like Sukanya Samriddhi Yojana, Child Insurance Plans aim to fulfill the financial requirements of children. Inclusive of their higher education, marriage, and important life events.
 

• Pros

Child Insurance Plans usually come with the option of a Premium Waiver Benefit known as PWB. PWB ensures that the insurance policy continues without the payment of premium in the case of the unfortunate demise of the earning parent or parents.
 

Another benefit of child insurance plans is that they can be taken for both girls and boys. Unlike the SSY scheme, this doesn't limit the benefits to girls only.
 

Under child insurance plans, parents can choose their desired maturity period. They can also decide on the money-back period and mode in some plans.
 

Like the Sukanya Samriddhi Yojana, investments made under Child Insurance Plans enjoy tax benefits. These benefits fall under section 80C, making money back and maturity amount tax-free.
 

• Cons

Child Insurance Plans offer lower bonus rates than the Sukanya Samriddhi Yojana interest rate. These lower bonus rates entail parents opting for a higher Sum Assured (SA) to meet the adequate financial requirements that lead to high premium payouts.

Conclusion

Sukanya Samriddhi Yojana offers sovereign guarantees, complete tax benefits, and an attractive rate of return. It is an ideal risk-free investment scheme for girls.

However, investments under SSY can get derailed in the case of the unfortunate and early demise of the earning parent(s). Hence taking insurance coverage is important.

Parents who don't wish to invest in relatively expensive Child Insurance Plans can opt for cheaper Term Insurance Plans. These plans insure earning parents' lives and invest the remaining sum in Mutual Funds. This investment scheme offers superior returns.