Ask a typical Indian parent what her best investment is, and most probably the immediate response will be an energetic, ecstatic “my child’s education”. A few years ago, meeting the needs of the child gained even greater priority than providing for one’s own retirement, but thankfully, this trend is correcting. Like all investments, this category comes with its own risks or mistakes that the parent makes. When emotional factors hold sway over an investment decision, they are fraught with risks as these examples will show.
Buying a product with the words ‘child welfare’ on it: The worst mistake that you can make is to buy a life insurance policy on the life of a child, ignoring the principle that the earning member’s life is to be covered. Such a policy will not pay the college tuition if the parent dies. Marketing allows “children” products to be sold easier than others. It is important to understand how the product works and what the underlying risks and possible returns are. A good adviser will be able to “construct” a product that is customised and appropriate.
