It's every parent's greatest worry. Will they be able to afford higher education for their children? And, what about the other expenses that loom in the distant future?

Now, they've got more choices than ever before if they want to save for their children's future. Says Shyamal Saxena, vice president, liabilities products, HDFC Bank, "Till about two years back, the options for investments for children were limited and had very few value- added features. Today, parents have so many options to chose from depending on their situation."

Inevitably, life is more complicated when there are more choices to be made. The first decision to be made is whether you want a mutual fund-based product, in which case returns are not guaranteed. The returns depend on the fund's net asset value at maturity.

Or you can pick an insurance-based product, which guarantees a fixed amount. The bonus is decided by the company on an annual basis. "It is difficult to say which is better, sometimes returns on mutual funds are higher than deposits. The individual has to decide which to pick depending on finances and risk profile," says a Life Insurance Corporation development officer.

Companies like LIC or Unit Trust of India have always had schemes for children. But LIC has recently re-launched its earlier version of the children's money back policy as Komal Jeevan. There are also other schemes like the Kid's Advantage Account from HDFC Bank, ICICI Prudential's Smart Kid, Prudential ICICI Mutual Fund's Child Care Plan and Om Kotak's Child Advantage Plan.

First let's take a look at LIC's newly- launched scheme. Komal Jeevan is a money back policy with a guaranteed assured return at the rate of Rs 75 per annum per thousand of the sum assured at the end of each year. If you take a policy with a sum assured of Rs 100,000, then Rs 7,500 will be added per year. Introduced last December, it also comes with a premium waiver benefit and a term rider benefit.

Under Komal Jeevan, one can take a policy with a minimum sum assured of Rs 100,000 upto a maximum of Rs 25 lakh (Rs 2.5 million) for a child below the age of one till 10. The policy matures when the child turns 26. Being a money back policy at the end of 18 and 20 years, the child will receive 20 per cent of the sum assured while on completing 22 and 24 years the child will receive 30 per cent of the sum assured. On turning 26, it will get the guaranteed assured return plus the loyalty addition, which will be declared by LIC over time.

The premium waiver benefit is available till the proposer [the person who takes the policy for the child] is 50 years. It comes at an additional premium cost depending on his age. The waiver essentially means that if anything happens to you before the child reaches maturity age, he or she will still get the policy benefits. Similarly, the term rider benefit allows the proposer to also opt for an insurance cover to the extent of 20 per cent of the sum assured by paying an additional premium.

The policy's risk cover for the child commences at the age of seven or after two years of taking the policy, whichever is later.

ICICI Prudential's Smart Kid scheme, introduced over a year ago, leaves the policy maturity period to the parent. For this, the child has to be between 22 to 25 years. It comes with additional benefits like the income benefit rider (10 per cent of the sum assured is paid annually on each policy anniversary), accident and disability benefit rider (an insurance cover against death or disability due to an accident, it will also provide regular income for the next 10 years). Parents in the age group of 20-60 years with children in the 0-12 age band can apply for this.

The minimum premium has to be Rs 8,000 per year, and the sum assured can range between Rs 1 lakh and Rs 30 lakh. The maximum benefit under both the riders is Rs 10 lakh (Rs 1 million).

There's also Prudential ICICI's Child care plan which is a fund-based scheme. There are two options under this — the study and gift plan. "If the end use is higher education, choose the study plan. However, for a long term investment, the gift plan is ideal," says a Pru ICICI investment officer. The study plan is a debt fund with a fund size of Rs 11.07 crore (Rs 111 million) while the gift plan is an equity fund with a corpus of Rs 9.68 crore (Rs 97 million).

For the study plan, the child should be between 13-17 years since the term of the plan is 3-5 years.

For the gift plan, the child's age at the time of application has to be between 1-13 years, since the term is 6-17 years.

HDFC Bank's Kid's Advantage Account requires the parent to open an HDFC Bank account. The parent has to invest a minimum of Rs 25,000 in a fixed deposit in the child's name for a minimum duration of six months. An account linked to the FD will be opened in the child's name. Children above seven also get a debit card.

"Basically, whatever scheme one picks, one should ensure that small amounts are invested regularly," says Saxena. Stipulated amounts are then swept from the parents' accounts to the child's account. As and when the amount in the account crosses Rs 10,000, it is automatically swept into an FD for a duration that the parent chooses. There is also a built-in education insurance cover of Rs 100,000.

OM Kotak Mahindra's Child Advantage Plan is also an insurance-based plan with a maximum sum assured of Rs 25 lakh (Rs 2.5 million). It offers the sum assured plus the bonus on maturity. The policy also offers a Kotak Life Guardian Benefit or premium waiver benefit as well as the accidental disability benefit.

All of the above schemes offer tax benefits under Sections 88 and 10 (d) as far as the premium payments and maturity amounts are concerned. And, as they say, nothing is too good for your children.

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