Five Reasons Working Parents Need to Invest in Monthly Income Schemes

5 Reasons Parents Need to Invest in Monthly Income Schemes

One of the most wonderful experiences a parent can have is the birth of a child. The birth of your child is, without a doubt, the happiest event of your life. However, with this joy comes the responsibility of beginning to plan for the child's future. Changes to your home, toys, clothes, a walker, and other recurring expenses will be deducted from your normal income.

A portion of your savings should go for your child's higher education and marriage aspirations. While a child's ambitions are vital, you cannot sacrifice all of your other current and future aspirations for them. The greatest method to ensure that you can reach the majority of your financial goals in life is to plan ahead. Having a monthly income scheme is therefore crucial for a new parent couple. The following are some of the benefits of having a sound financial plan :

  • Increased savings
  • Investing with greater efficiency
  • Making better investment decisions
  • Protecting your child's ambitions
  • When investing and withdrawing from an investment, you can save more money on taxes.

What is a monthly income scheme?

A monthly income scheme, as the name implies, is a strategy in which a person receives a certain amount of money each month. After a few years of premium payment, this money usually accumulates. Monthly income plans are more commonly referred to as monthly guaranteed income plans, assured monthly income plans, or monthly pension plans in the life insurance market. Unlike MIPs given by mutual fund firms, life insurance companies monthly income plans include an insurance cover to safeguard the insured person and, in some cases, a maturity benefit payout at the end of the policy term. This distinguishes the plan from pure play MIPs, which typically pay investors on a monthly basis.

What are the different types of monthly income plans?

Life insurance firms offer a variety of monthly income scheme options, which investors should be aware of. Some monthly investing plans begin paying out after the premium payment period has completed, while others begin while you are still paying your insurance premium. There are significant differences in terms of insurance coverage, admission age, and perks provided, among other things. If you're searching for a MIS plan to supplement your monthly income, take a look at Bharti AXA to learn about the different sorts of plans available.

They describe the sort of plan, its features, the benefits it offers, the entrance age, and so on. They also provide information about online money income programmes that can be purchased in a matter of minutes from the convenience of your own home. Each plan has its unique set of advantages, so doing your research before purchasing the finest monthly income plan makes sense.

How should parents plan when they start a family?

Now that you understand why planning is so important and what it can accomplish, you should put it to use for your child’s objectives. To do so, follow these simple three-step instructions :

Define Your Objectives

The first stage in every strategy is to figure out what you’re going to plan for. What are your objectives for this strategy? Before you begin, you must have a clear understanding of the goal for which you are planning. A clear and unambiguous aim will go a long way in assisting you and your family

Choose Your Investments Carefully

You want your child’s future investment option to include at least three of the following features: A variety of investing possibilities based on your risk tolerance, a safety element for the goal in the event of an emergency, tax savings and growth that is not taxed. Here are a few investment alternatives that provide all of the above:

Unit Linked Insurance Plans

ULIP is a diversified monthly income scheme with the safety of life insurance. Except for pension and annuity products, all unit linked products must include a mortality or health cover, hence raising the risk cover component of the contract. Plans offer advance investment and safety features :

  • Invest in a portfolio that includes both equities and debt funds.
  • Automated asset strategies allow you to alter your portfolio based on market performance without having to intervene.
  • Except for single premium policies, all limited premium unit linked insurance products must have a premium paying period of at least five years.
  • Safeguard your child’s goal with premium funding benefits. This benefit permits your policy investment to continue even if you pass away unexpectedly. Hence, your child will benefit from the maturity benefit you intended for him or her.
  • After 5 years of continuous investment, the policy allows for partial withdrawals.
  • Claim a deduction for the invested amount of up to Rs 1.5 lakhs from your taxable income each year.
  • Withdrawals that are partial in nature and maturity proceeds are exempt from tax provided that all the conditions of investment are met.

Guaranteed Savings Plan

Guaranteed Savings Plans provide benefits that are guaranteed upon maturity or death. Hence, if you want to be sure that your child will have the financial assistance, he or she requires whether or not you are present, this is the greatest alternative. The following are some of the advantages of the Guaranteed Savings Plan :

  • Guaranteed bonuses to enhance growth
  • Tax-free investment and maturity values
  • Safety of capital
  • Premium funding advantage in the event of a premature death

Start Investing

You must begin investing after deciding on your preferred method of accumulating a corpus for your child's aspirations. The optimal method or frequency of investment for you would be in accordance with the frequency of your income. For example: If you are salaried, go for a monthly mode of investment, If your income is irregular you can choose a half-yearly or yearly mode of investing. You may provide strong financial support for your child's goals by following these three simple measures.

Increase your Savings with a Financial Plan

Proper planning helps enhance your savings. This is the method by which your budget is created. You begin to determine your present income and expenses when you create a budget. Doing this will help you to -

  • Make a list of all the expenses you can minimize or eliminate.
  • Maintain your expenses and curb overspending.
  • Set yourself saving goals.
  • The more you can keep your spending under control, the more money you'll be able to save. Prioritizing spending provides you a leg up on the competition when it comes to conserving money. Remember, that your savings today will become your fortune tomorrow.

Choose Better Investments

You need to have a monthly income scheme for two simple reasons – To safeguard it against inflation and to have a little more in the future. How much of this you can do is largely dependent on where you put your money. Your comprehensive financial plan must address the subject of where to put your savings. Your financial plan will present you with a variety of investment possibilities based on the following factors :

  • How much of an investment risk would you be comfortable with?
  • How long can you stay mentally invested in a goal?

You can arrange your money in a variety of ways based on these two. Here are several examples :

  • Five years and above
    • Equity-linked savings plans combined with debt mutual funds
    • Unit-Linked Insurance Plans with a limited share in equity funds
    • Public Provident Fund (PPF)
    • Guaranteed Savings Plan
  • Less than five years
    • Debt mutual funds
    • Bank and post office deposits

Safeguard your child’s future goal

Your financial plan's role also includes ensuring the safety of crucial goals for your family. A monthly income scheme includes planning for contingencies. Even after a mishap, it is critical for your family to retain their lifestyle and achieve their goals. A financial plan will assist you in putting money aside for insurance coverage and emergency reserves to cover any eventuality. For example :

  • Increasing your term life insurance after you have a kid is one strategy to ensure that your child has a secure future.
  • You can employ child policies from life insurance providers to ensure that your child receives a maturity value even after your death.
  • Invest in your emergency fund to cover your child's school and educational costs.

Make Tax-Efficient Investments

Taxes are the single factor that can affect the growth of your investments after inflation. That's why financial experts advise investing for long-term goals with tax-advantaged investments. The following are some of the top tax-saving investments for your child's future :

  • Child Education ULIP
  • ELSS mutual funds
  • Public Provident Fund (PPF)
  • Sukanya Sammridhi Yojana

Invest More Efficiently

A whole life insurance monthly income scheme will ensure you are investing for the most important life goals first. This is critical since new goals may arise every day of your life. However, you should always have enough to care for the people that matter the most. Investing in a new car, for example, may be more important than travelling to your favourite country with your family. While the timelines for both goals may overlap, the expense of not replacing your car is more than the cost of not visiting your dream destination for a year or two. Financial planning helps you direct your scarce savings efficiently after prioritizing your goals.

Disclaimer:

*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

Suggested Plans

Bharti AXA Life Guaranteed Wealth Pro

  • A non-linked, non-participating individual savings life insurance plan
  • Flexibility to choose the payout structure
  • Multiple income options
  • Option to receive tax free income beginning from the second policy year itself
  • Option to get lifelong income along with life cover till 100 years of age

Bharti AXA Life Shining Stars

  • Non-linked, non-participating limited pay endowment Life Insurance plan
  • Designed to take care of the financial needs of your child.
  • Flexibility to opt between 2 Maturity Payout Options
  • Flexibility in Policy Term/Premium Payment Terms
  • A great short-term investment option for a child insurance policy.

Bharti AXA Life Super Series

  • A non-linked non-participating individual life insurance savings plan
  • Range of investment duration and returns
  • Guaranteed money back benefits (provided policy is in force and all due premiums have been paid)
  • Income tax benefits (as prevailing tax laws in India that are subject to changes)