What are the pros and cons of investment plans – PPF v/s Child Palns (from LIC) ?



I am thinking of putting money in chid plans from LIC. I am already maintaining PPF A/c from last 4 years. My target is good corpus amount after 10-15 years. So should I opt for child plans or put all money intoo PPF only ?

What are the pros and cons of investment plans – PPF v/s Child Palns (from LIC) ?
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3 Replies to “What are the pros and cons of investment plans – PPF v/s Child Palns (from LIC) ?”

  1. dear gurprit
    if your aim is to protect child feature. then go for child plan. since your time horizon is long go for unit link child plan.



  2. Hi Gurpreet,
    Its really good that you have started investing in PPF.
    Please check the following text which I have copied from Moneycontrol.com MessageBoard.

    There are innumerable products that focus on Children and they are primarily two types:

    1. MUTUAL FUND SCHEMES that invest for the child, which are all basically Balanced Funds (except for UTI Children’s Career Plan Bond Option which invests only in debt).

    2. INSURANCE COMPANY PRODUCTS that either:
    traditional plan in which the insurance company takes all the investment decisions on your behalf and the return on the policy is in the form of bonus payable on maturity.
    ULIPs.

    I am not convinced yet about the Insurance company products that make repeated advertisemnts on TV noawadays promising that the child can becomes what he likes in life – all that he has to do is just take a child policy (apparently he even does not have to work or study hard!). I would suggest that you SHOULD NOT INVEST IN ANY, I REPEAT `ANY`, CHILD POLICY by ANY INSURANCE COMPANY.

    Child Products by Insurance Companies are to be avoided because-

    1. There is no need for an insurance component in a Child Plan as they are young and parents are not dependednt on their income. However, the only consolation is that they may have an option where in the target amount is paid even if the parent passes away,but you pay through your nose for such an option (as it is, if you have your own insurance policy, you do not need this option either).

    2. The deductions from your premium paid is HUGE and they have VERY HIGH costs. All those repeated advertisements you are seeing on TV and the incentives to agents who will chase you to join their schemes are all cut from YOUR PREMIUM and only the rest is invested. I read from Hindu BusinessLine just today of an investor who asked why he got back ONLY Rs.11,000 from a ULIP product after he had put Rs.1,00,000 in it after his retirement in 2006.

    So I will skip ALL Child Plans by Insurance Companies AS THEY ARE A BAD CHOICE.

    The only schemes worth considering are from Mutual Funds.Some of the prominent Mutual Fund Schemes are:-

    1. Prudential ICICI Child Care Plan: It offers a Study Plan and Gift Plan. Study Plan invests 85-100% in debt and 0-15% in equity, the Gift Plan invests 65-100% in equity and 0-35% in debt. This fund has NO LOCK-IN PERIOD and investors can withdraw money any time. However, early redemption is discouraged by charging an exit load of 2.5% if investments are redeemed within three years. The fund will levy an exit load of one per cent, for investments held for three years, but withdrawn before the beneficiary child attains 18 years of age.

    2. HDFC Children`s Gift Fund : It too has two options: Savings Plan and Investment Plan. Savings Plan invests 0-20% in equity and 80-100% in debt and Investment Plan puts 40 – 75% in equity and 25-40% in debt. It is optional to take a lock-in period which is until the child attains the age of 18 years or until completion of 3 years from date of allotment , whichever is later. There is no Entry Load, and exit load for investors who take a lock-in option. However For units not subject to Lock-in Period there is exit load of 3% if redeemed within 1 year, 2% if redeemed between the first and second year and 1% if units are redeemed between the second and third year, nil thereafter. No Exit Load shall be levied on bonus units and units allotted on dividend reinvestment.

    3. Principal Child Benefit PlanCareer Builder Plan : It invests minimum of 65% and maximum of 75% in equity and rest in debt. It has no Entry Load but Exit Load – is 1%, if redeemed on or before 1 year from the date of allotment.

    4. Templeton (I) Childrens Asset Plan. It has choice of 2 plans: Education Plan and Gift Plan and in both schemes the units are lcoked-in till the child attains 18 years of age. Education Plan can be used for meeting regular expenses for children`s education. Dividends can be withdrawn 4 years from the date of first investment. Gift Plan has Dividend & Growth options.

    5. Tata Young Citizens Fund in which around 50% of the funds are invested in equity and rest in debt.It has two options : Anytime Exit Option and Lock-in Option. Under this Anytime Exit Option redemption is permitted before the child attains 18 years of age. However, Exit Load is 3%, 2% and 1% if redeemded within 3 years, 3 to 7 years and more than 7 years respectively. Under Lock-in Option, investment will be locked in till the child attains 18 years of age.

    6. UTI Children’s Career Plan: It has two plans : Balanced Plan that invests maximum 40% in equity and Bond Plan that does not invest in equity at all. The Bond Option has not entry or Exit Load. However, the Balanced Plan has Entry Load of 2% and Exit Load of 3%, 2%, 1% and 0% if exited after less than 2 years, 2 to 4 years, 4 to 5 years and more than 5 years respectively.

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