You plan to provide the best education for your child, help establish her career and give her the dreamiest wedding ceremony.

Increasingly, parents are looking at unearthing solid sums of money at strategic moments in their children?s future. That is the reason why insurance companies and mutual funds are targeting them through their children.

Here?s a look at what the market has to offer.

The most basic option available is the endowment plan for those who seek safety first and the attractive feature is that they are designed to provide funds at certain milestones in your child's life.

For any child policy, the crucial feature is the waiver of premium benefit, which means all payments after the premium payer?s death are waived but the financial benefit continues to accrue.

As with all the traditional endowment policies, the catch is that the returns on such policies are not very high. It is because under such profit-sharing policies, based on the company?s performance, the surplus, if any, is distributed as bonus to all the policyholders. Looking at LIC?s decreasing bonus rates over the last few years (others have not yet done their valuations), there will not be much upside.

Unit-linked plans for children can provide an answer in such situations for those who have an appetite for higher risk. It also allows the flexibility to switch money between different assets and also change the allocation of funds within each asset class.

Popularly known as top-up or premium reduction options, the plans also allow you to invest additional funds at a nominal charge or to decrease existing premiums, although with some restrictions.

While there is greater flexibility, the charges associated with ULIPs are also higher, largely in the initial years when they range upwards of 20 per cent of policy premium along with additional administration charge and management fees. In the case of mutual funds, administration and fund management charges are adjusted in the net asset value. The entry loads in equity-based mutual funds too are low at about 2 per cent.

ULIPs function like mutual funds except that since they also provide insurance, they have a higher charge structure. Unlike endowment plans, individuals have the flexibility to withdraw various amounts, after a minimum of three years.

Using insurance products as an investment device works best if you want to ensure that your child gets fixed sums at given times and for a given purpose, especially if you are concerned that after your demise, your family will be without guidance. They also work if you don't have the time to track complex investment instruments. For those who are more solvent and who want to separate insurance and investment products, there are other ways to secure your child's future.

If you want to just insure for a cover, it is advisable to purchase a pure-term insurance plan, which covers only the risk of loss of life. Here, there is neither profit-sharing as in endowment plans nor market-linked returns as in ULIPs and your nominee will receive money only on your death. But they also carry the cheapest premiums and the money you thus save can be invested in a balanced or pure equity mutual fund scheme, since it?s a well known fact that in the long-term, equity outperforms all the other avenues of investment.

Although ULIPs might outperform equity funds beyond 12 to 15 years, they don't have a long enough track record to say this with any certainty. Thus, for the present, it's safer to go with mutual funds with a performance history.

Many mutual funds have select schemes dedicated to children. Since investors target the money for the child's future, they tend to churn their investment less. This means fund managers face lower redemption pressure and can focus on long-term goals. In fact, these funds discourage churning with relatively higher exit loads of about 4 per cent, which fall with increasing tenure.

With mutual funds, therefore, not only can you target and achieve higher returns, especially with equity-based schemes, but you can also save on costs like the commissions insurance companies have to pay agents.

So, although there are ample insurance options to choose from, you should consider the mutual fund schemes too.

The underlying note is that both insurance and investment should have their part in the portfolio. While you definitely must insure your life, for death or disability, so that your child is not left stranded, you should also ensure that you multiply your money for your child's use.

Your choice will depend on your risk appetite and inclination to track instruments, but whatever you choose, do your homework. After all, it's your child's future you're investing in.