Financial concerns for the kids have too become core concerns of parents. And there is a surfeit of investment opportunities for your kid. And it is not surprising then that a number of different financial intermediaries offer schemes for children. Various schemes of LIC and specially schemes for children from various private and public sector mutual funds are available.

However, it is necessary to identify the need of the investor. With these needs in mind, various schemes have been formulated. Lets take the case of mutual funds. Should one, keeping in mind that we are saving for the child’s future needs, put money into an ordinary open end income scheme or a special scheme for children. A look at the various schemes would reveal that most have lock in periods, some as long as 18 years. Will it not be wiser to invest money into an ordinary income scheme, which provides ready liquidity, and similar returns. This liquidity means that you can churn your funds in various schemes depending on the returns. In a special scheme, thanks to the lock in period, the investor may just end up watching, helplessly, the suffering NAV in case of poor performance of the scheme. The investor will have to ensure that he does not use the liquidity to lose sight of the objective saving for his children and buy a new car for himself instead.

The other crucial question is then the choice between LIC schemes and mutual funds schemes. On a return basis, these will lag behind mutual funds. The advantage of these schemes lies in the insurance cover that these schemes provide. In a policy like Jeevan Sukanya for instance, the girl child not only receives the sum assured on attaining a certain age but also gets the assured amount again in the death of her husband who is included in the insurance cover once she gets married thus providing her financial security.

The other advantage is that of a low initial outlay. With mutual funds requiring one time investment, which then grows over a period of time, the initial outlay needs to be large, though one can modify it and buy minimum units every year in a phased manner, which can then impact final returns. In the case of Rajlakshmi Unit Plan for instance a one time investment grows to a particular amount at the end of a certain number of years. Thus this needs a good amount initially.

The third and important for some investors, is that the final amount at the end of the investment period is assured in the case of LIC schemes. In the case of mutual funds it will depend upon the performance of the particular scheme. There are arrsured return schemes in Mutual funds too- RUP II and CGGF- both from UTI.

With this in mind it seems that a mix of schemes from mutual funds and LIC would be right approach

The CMBP is one of the most popular policies. In this case, the risk cover starts at the age of 2 years or 7 years after the policy commences operation, whichever is later. This takes care of the growing needs of the child after he attains majority. This is ideal for study plans since the money keeps coming at regular intervals of two years beginning age –18. The minimum sum assured has to be Rs.25000 while the upper limit is Rs.15 lacs. Payment of premium ceases after the child attains the 18 years of age. However, with the option of annual, six monthly, quarterly premium payments, it allows even the low and middle-income families to pay up without too much difficulty. While the policy can be bought to a newborn, the maximum age for eligibility is 10 years.

This policy will have to be proposed by either father or mother. It can also be gifted by close relatives, as single premium policy, but it will have to be proposed by either parent. It has two very innovative features, which can be availed of by paying a marginally higher premium.

First is the premium waiver benefit. Under this, if something were to happen to the proposer of the policy before the beneficiary child turns 18, all future unpaid premiums are waived.

The other benefit is a term rider, wherein, in the case described before, that is the death of the proposer during the premium paying term, not only do the premium gets waived, but the family of the proposer also gets a sum equivalent to 20 percent of the sum assured as benefit. Based on the mode of payment and the amount of sum assured, this scheme has two types of rebate.

For the yearly mode of payment, rebate at the rate of 3 percent of the tabular premium will be provided, while this would be 1.5 percent of the tabular premium.

For the sum assured Rs 25,000 to Rs 49,999, rebate of Re 1 per thousand of sum assured be provided while this would be Rs 2 per thousand of the sum assured in case sum assured is Rs 50,000 and above.

LIC guarantees payment of additions of Rs 80 per annum per thousand of the sum assured at the end of each year. This means that each year for the sum assured of Rs 1 lacs, Rs. 8,000 will be added. This will be payable either at the maturity on policy anniversary following the attainment of age 26 or on death, if earlier.

In addition to this, loyalty additions will be given. This will depend on the term and sum assured under the policy.

Sum assured would be paid in installments of 20 percent on the policy anniversary following the attainment of age 18, 20 percent at 20 years, 30 percent at 22 and 30 percent at 24 and at the age of 26 guaranteed and loyalty additions will be paid.

This scheme does not offer the accident and permanent disability benefit. No loan is granted under this policy.

Like the CMBP, Jeeven Kishore Policy ( JKP ) is also insurance on the life of the child. Here too, premium waiver benefit is available by paying a small additional premium. This policy can be proposed by either parent, preferably by the father. In case of absence of both the parents, the legal guardian can fill in.

Under the scheme, the minimum sum assured is Rs 10,000, while the maximum is Rs. 15 lacs. The minimum term is 5 years and maximum 35 years. The premium can be paid either half yearly or yearly.

No medical examination is necessary, if the age of child on the date of proposer is less than 10 years.

The commencement of risk in this scheme is like that in CMBP. Loan can be granted for the child after the vesting of the policy, which automatically vest in the child on the policy anniversary falling on or immediately following his/ her attaining majority.

The sum assured along with the bonus and final additional bonus would be payable on the maturity or on death (if earlier). But death should be on or after the date of commencement of the risk.

In case the child dies before the risk premiums are paid (which does not include the premiums for premium waiver benefit), it will be refunded.

Substitution of child is not permitted in this scheme. The main difference between Jeevan Kishore and CMBP is the fact that while the latter allows payment of accumulations in installments, the former makes that payment in lumpsum.

Therefore, CMBP is more suited to those who are saving for the college education of their children, while Jeevan Kishore plan suits those who are saving for the marriage or business venture for their child.

This is a unique scheme, which provides automatic insurance for the husband once the girls gets married. This scheme is exclusively for the girl child. It can be taken kids between 1 and 12 years of age.

In this plan, payment premium term will be equal to the 20 years minus age at the time of entry. For example. If the age at the time of entry is 5, then the premium paying term will be 15 years.

Under this scheme, the minimum sum assured is Rs. 10,000 while maximum is Rs. 25 lacs. This is a with profit plan, where bonuses vests only on the date of commencement of risk or at the end of five years from the start of the policy, whichever is later.

The premium can be paid yearly, half-yearly, quarterly or monthly.

Risk cover under this plan begins 2 years after the date of commencement or from the policy anniversary falling due on or immediately after the date on which the life assured attains the age of 7 years.

The automatic cover for the husband is without additional premium. It starts from the policy anniversary on or immediately after completion of 20 years of age by the life assured, or three calendar months after the date of marriage or one calendar month after the receipt of intimation and evidence of marriage with the life assured.

If the husband dies before the commencement of risk and date of maturity, then an amount equal to the full sum assured (without bonus) will be paid to the wife. Despite this risk cover, the full sum assured will continue and the policy will also continue to participate in profits. But the risk cover on husband will cease if wife dies before the husband.

With a minimum sum assured of Rs. 10,000, the marriage or education plan is aimed at keeping aside the certain sum for marriage or educational expenses of the child. The sum assured along with bonuses is payable at the end of selected term. Payment may be made in lumpsum amount or in 10 half-yearly installments. This would be at the option of the life insured, nominee or the beneficiary.

The first instalment will be payable on the date of maturity. These installments will be calculated at the rate, which would be declared by the LIC from time to time.

Children's College and Career Fund, an open ended Scheme launched in 1993, seeks to fulfil a parent's dream by providing for the cost of higher education etc. of a child through payment of scholarship on yearly/ half yearly basis in a tax friendly manner. Investment made in the Scheme grows through accumulation of bonus units. The rate of accumulation of bonus units is declared every year.

After the child completes 18 years of age, returns will be distributed by way of scholarship in chosen number of installments. The Scholarship amount paid to the child will not be clubbed in the hands of parent/ guardian/ other investor, and will be thus completely tax free as per

Section 10 of Income Tax act.

Features:

1. An open ended (for sale only) growth fund.
2. ii. Any resident or Non-Resident individual including parents, relative as also company, body corporate, eligible institutions can invest in the Scheme, for the benefit of a child below 15 years of age. Investment can be made either for a resident or a Non-Resident child.
3. Investment made in the name of a child is an irrevocable gift.
4. The investor can name an alternate child who will receive the benefit of investment in the unfortunate event of death of the first child.
5. Under Section 10(16) of the Income Tax Act, 1961, scholarship granted to meet the cost of education does not form part of the total income of the child. The amount is not clubbed with the parents\guardian's\other investors income too, making it totally tax-free.
6. The Gift Tax Act, 1958 has abolished the levy of Gift Tax in respect of gifts made on or after 1st October 1998. Thus a gift made under the scheme is exempt from the levy of gift tax without any upper limit. Also, the value of investments in units under the scheme is fully exempt from Wealth Tax.
7. Minimum investment under the Scheme is Rs.2,000/-
8. Units are allotted at NAV plus 3% sales load throughout the year except during the book closure period, which is normally in June every year.
9. Sale and repurchase prices of units are announced every month.

Rajlakshmi Unit Plan (II) is an exclusive Plan for the benefit of women, for her who brings so much love and sunshine in our life and deserves all our reverence, respect & love from every one of us. In the midst of our formative and critical periods of life, she as mother, sister, wife, daughter or any other relation forgets herself to see us free of worry and pain, to see that smile on our face.

The Plan is meant for all those who care for her future, when she would enter the most critical phase of her life, around the age of 18 and encounters the challenges of marriage, entry and adjustment in a new household, motherhood and economic independence. Let not, what should be the most joyous years of life turn the darkest in her life. The critical financial needs for this period can be met if you plan and save now for her years of dream. And you can do so comfortably if you start now.

The Plan aims at providing attractive maturity amount to a girl child not exceeding the age of 5 years. The amount invested grows 10 times the original investment in 20 years. Thus Rs.1,500/- invested in the name of a girl child before her first birthday, will become Rs.15,000/- after 20 years. Depending upon the age of a girl child, the plan matures after completion of lock-in-period ranging from 16 years to 20 years as shown in the table below.

Features

1. The investor can name an alternate girl child up to 5 years of age who will receive the benefits in the unfortunate event of death of beneficiary girl child.
2. No proof of age is necessary.
3. The Gift Tax Act, 1958 has abolished the levy of gift tax in respect of gifts made on or after 1st October, 1998. Thus gift made under the Plan is fully exempt from levy of gift tax without any upper limit. The value of investments in units under this plan is fully exempt from Wealth Tax.
4. On completion of 18 years of age of the child, the girl can withdraw the maturity amount if she wishes. In that case, the lock-in-period will range between 13 years and 18 years depending upon the age of the child. The table below gives the maturity values for the minimum investment of Rs.1,500/- for various lock in periods.

Child I-nit '97 has been launched with the objective of providing lumpsum return to the beneficiary at the end of the specified period for fulfilling a specific objective of the beneficiary like his/her higher education, marriage etc.

Plans One Time Investment Plan and Recurring Annual Investment Plan.

Target Period Choice of flexible target periods of 7, 10 and 15 years for both plans

Minimum Investment (One Time) Rs. 5000/-, 6000/- and 7000/- for 7, 10 and 15 years target period respectively.

Minimum Investment (Recurring) Rs. 1000/- for all target periods.

Maximum Investment (One Time) No Limit

Maximum Investment (Recurring) Rs. 12000/-, 9000/- and 7000/- for 7, 10 and 15 years plan respectively.

Additional Investment Multiples of Rs. 1000/- for both plans upto the maximum amount specified above. Investment Pattern Minimum of 80% of the corpus will be invested in Debt and Money Market Instruments and the balance will be invested in equities.

Redemption Automatic on expiry of lock-in period of respective plans.

Unique Insurance Cover to first applicant in case of Recurring Annual Investment Plan only. Death of first investor after payment of third subscription is covered to ensure that the beneficiary gets the indicative maturity amount at the end of the target period.

Age Limit on entry in Recurring Annual Investment Plan Maximum age limit on entry of first applicant is 45 years for 7 & 10 year target periods and 40 years for 15 year target period (in Recurring Annual Investment Plan only)

Indicative Maturity Amount (Minimum Investment) Rs. 12000/-, 20300/-, 42000/- for minimum amounts under both plans respectively. For amounts above the minimum, the indicative amounts will increase as per the investment made (subject to maximum permissible investment limit)

Early Exit Option Repurchase after lock-in period of three years; available round the year.

Maturity Amount At NAV

Fund

Highlights

Education Plan

Gift Plan