‘Fable-ous’ reasons to invest in child plans

Draw financial planning lessons from some well-known fables

When your child is at the finishing line, can you afford to be halfway in your race? Confused why this question is being posed to you?

Think of a situation a few years from now, when your child is about to attain the age of 18 and is ready to take the first step towards higher education. You cannot afford to be short of funds.

It is time to address this question now, when your child is still young. Here is an effort to explain financial planning for your child’s future through some well-known fables.

Slow and steady wins the race: Years ago, the quick rabbit lost the race to the slow, but steady, tortoise. Steady is the key learning in this story. If you save consistently, the power of compounding will be your friend that will ensure that you are at the finish line before your child’s education needs reach there.

All your efforts to save in the end, will be as useless as that of a rabbit who realised a bit too late that he overslept.

For example, a person who starts investing ₹50,000 a year when his child is three years old, continues to invest the same amount till the child is 18 years old, earning 8 per cent interest per annum, will have a healthy corpus of ₹14.66 lakh.

In contrast, another person who starts when the child is eight years old and continues to invest ₹75,000 a year for the next 10 years, earning the same 8 per cent interest per annum, will have a corpus of ₹11.73 lakh.

While both have invested the same ₹7.5 lakh, the one who started early will have almost ₹3 lakh more for his child’s higher education.

Handsome is what handsome does: While drinking water in the pond, the deer admired his mighty horns but regretted having such thin legs. While the legs could have saved the deer from the attack of a lion, it was the beautiful horns that got caught in the overgrowth and the deer lost its life.

While smart-looking, high-yielding schemes may look attractive, only steady schemes fulfil life stage needs like your child’s education. And when it is as critical as your child’s future, you have to rely on ‘handsome does’.

A bird in hand is better than two in the bush: Remember that greedy dog that saw its image in the water while crossing a river and wanted to get another piece of bread from the dog in the river? It barked at the image and lost what he had.

There will always be other sellers of financial products who will try to entice you through “new, improved products” and coax you to get out of your existing long-term investment in life insurance.

Resist the temptation because you could end up losing the opportunity to realise high returns in the later part of your policy, when charges are low, and you may end up buying a product by paying a higher amount upfront once again. So, stay invested!

Don’t leave it to chance: Remember the story of three lambs who were told by their parents to build their own houses as they grew up. The first one built a house of straws and soon he was enjoying the lush green meadows.

The second one built a house of mud and straw and joined the first one to have fun. The third one built a house with stones and cement and toiled hard for months. The first two lambs made fun of him. Sometime later, when the wolf attacked them, it broke through the straw and mud house easily but not through the solid defence of the third one.

Same holds true for your child’s future. Build a solid protection cover so that, under no circumstances, will your child’s future be compromised.

Go for a life insurance plan that offers triple protection of lumpsum sum assured, monthly payouts and waiver of premium so that there are no regrets in future.

Be the third lamb that toiled to build a solid protection, though it was not aware of the danger ahead.

The writer is Director Marketing and Chief Digital Officer, Max Life Insurance

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