In the pursuit of providing a bright future for our children, we often seek suitable investment plans to secure the child’s education and financial well-being. With the rising costs of education, it has become imperative to plan ahead financially.
We as parents do understand the importance of saving for our children’s future but often tend to overlook the specific factors that should be taken into account when planning for their child’s financial needs.
What to look for in an investment plan before you plan to invest?
- Diversify Savings: Explore multiple saving plans to ensure a diverse portfolio that can cover potential educational expenses, health emergencies, and miscellaneous costs.
- Future Financial Needs: Anticipate the impact of inflation and factor in the rising cost of goods and services when estimating the amount needed for your child’s future requirements.
- Utilize Current Income: Assess your present income and determine if you can allocate a portion towards building your child’s savings corpus.
- Long-Term Approach: Opt for long-term saving plans that offer assured maturity amounts and minimize risk exposure, ensuring stable growth over time.
Remember, it is crucial to carefully consider these factors and select a child saving plan that aligns with your financial goals and provides sufficient financial support for your child’s future needs.
Best Investment Plans for Children in India:
Sukanya Samriddhi Scheme
Sukanya Samriddhi Yojana (SSY) is a government-initiated investment plan designed specifically for girl children in India. This scheme can be opened either at the time of a girl child’s birth or before she reaches the age of 10. It is available at authorized commercial banks and post offices across the country.
The tenure of the SSY is 21 years or until the girl child gets married, whichever is earlier. Once the girl turns 18, she has the freedom to operate the account herself.
The interest rate on the scheme is determined by the government on a quarterly basis, with the current rate set at 7.6% per annum. At maturity, the accumulated amount, compounded over the years, is handed over to the account holder. This amount can be utilized for the girl child’s education or marriage expenses, providing a financial foundation for her future endeavours.
Sukanya Samriddhi Yojana stands as a testament to the government’s commitment to empowering and supporting the education and well-being of girl children in India, enabling them to achieve their dreams and aspirations.
Fixed Deposit (FD)
When it comes to investing for your child’s future, Fixed Deposits (FDs) are worth exploring. FDs offer stability, and attractive returns, and are considered low-risk investments. The best part is that FDs provide a fixed interest rate, independent of market fluctuations. Almost all banks offer FD schemes, making them easily accessible to investors.
What sets FDs apart is that they don’t necessarily require a savings bank account with the bank. Many banks offer specialized FD schemes tailored for children, some of which may have unique features such as restrictions on premature withdrawals or even insurance coverage.
Alternatively, Recurring Deposits (RDs) are another option where you make regular small investments at a fixed interest rate. However, the returns from RDs may be lower compared to FDs.
FDs provide a secure investment avenue for long-term child investments, offering peace of mind and the potential for higher returns. To find the most suitable FD scheme for your child, it is advisable to explore various banks and their offerings.
Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a government-backed savings scheme that offers attractive features for long-term child investment. The government declares the interest rate on PPF every quarter.
Compared to fixed deposits or savings accounts, PPF provides a higher interest rate. It has a maturity period of 15 years, making it a suitable option for long-term savings for children.
One of the key advantages of PPF is its tax benefits. It falls under the Exempt-Exempt-Exempt (EEE) category, meaning that the principal invested, the interest earned, and the benefits accrued are all tax-free. This makes PPF an excellent choice for saving and growing funds for your child’s future without worrying about tax implications.
With its government backing, favourable interest rates, and tax benefits, PPF serves as a valuable tool for long-term child investment and can help you build a substantial corpus over time.
Gold holds significant value due to its non-depreciating nature, making it an attractive asset for child investment. It serves as a reliable hedge against inflation, preserving its worth over time.
Apart from physical gold in the form of jewellery and coins, there are digital options available as well. These include Gold ETFs (Exchange Traded Funds), SGBs (Sovereign Gold Bonds), and gold mutual funds.
Digital gold investments offer several advantages. They are generally safer since they eliminate the need for storage and security costs associated with physical gold. Additionally, there are no wastage charges involved. These investments also offer greater liquidity, as you can easily sell ETF or mutual fund units on the stock exchange.
Considering its non-depreciating nature and inflation-hedging capabilities, gold, whether in physical or digital form, can be a valuable component of a diversified child investment portfolio. It provides stability and potential long-term growth, making it a reliable asset for securing your child’s financial future.
Mutual funds are known for their potential to offer high returns, but they also carry a certain level of risk. When investing in mutual funds, there are two primary approaches: lump sum payment or Systematic Investment Plan (SIP).
A SIP involves regular deductions from your account, typically on a monthly basis, which are then invested in a professionally-managed mutual fund. This systematic approach helps in averaging out the investment cost and reduces the impact of market volatility.
For child investment, there are mutual fund plans specifically designed to meet their needs. These plans often fall under the category of hybrid mutual funds, which allocate funds to both equity and debt instruments. The allocation can be adjusted based on the investor’s risk tolerance and investment goals.
While mutual funds can provide attractive investment opportunities for children, it’s important to carefully assess the associated risks and choose funds that align with your risk appetite and long-term financial objectives. Considering their potential for growth and diversification, mutual funds are often considered among the best investment options for kids.
Unit Linked Insurance Plans (ULIPs)
ULIPs (Unit Linked Insurance Plans) offer a unique combination of insurance and investment, making them a suitable choice for child investment. With ULIPs, you pay regular premiums like any other insurance policy, but a portion of the premium is invested in market-linked products.
Investing in a ULIP-based child plan presents a great opportunity to financially prepare for your child’s education or marriage expenses. In the unfortunate event of the policyholder’s death, the child receives either a lump sum payment or regular payments according to the policy terms.
Certain ULIP plans even offer premium waivers in such cases, ensuring that the child continues to receive financial support to meet educational costs. This feature provides added security and stability for the child’s future.
When considering ULIPs for child investment, it is essential to carefully analyze the terms, benefits, and investment options offered by different insurance providers. Consulting with a financial advisor can help in selecting the most suitable ULIP-based child plan that aligns with your investment objectives and ensures adequate financial protection for your child.
In addition to these plans, you may also consider investing in the following plans.
- Aditya Birla Sun Life Vision Star Child Plan: This plan offers a money-back feature with reversionary and terminal bonuses at policy maturity. It provides flexible periodic payment options.
- Bajaj Allianz Young Assurance Child Plan: This plan offers an Accidental Permanent Total Disability Benefit and allows you to choose from different term options.
- HDFC SL Youngstar Super Premium Child Plan: This plan combines life insurance coverage with investment options, offering flexible benefit payment choices and a range of investment funds.
- ICICI Pru Smart Kid’s Regular Premium: This endowment plan provides attractive education benefits, along with the option for partial withdrawals and additional rider benefits.
- Kotak Head Start Child Assure Plan: This plan offers both regular and limited premium payment options, allowing partial withdrawals and annual fund changes.
- LIC New Children’s Money Back Plan: A participating and non-linked money-back plan that helps in planning for your child’s education, marriage, and other needs.
- Max Life Shiksha Plus Super: This plan provides life insurance protection and allows the flexibility to choose from five fund options.
- PNB Metlife Smart Child Plan: Offering guaranteed returns, this plan provides coverage options for various eventualities and helps secure your child’s education.
- SBI Life Smart Scholar Plan: A non-participating ULIP that combines insurance and market-linked returns, providing tax benefits and dual protection for the insured’s family.
- SBI Smart Champ Insurance Plan: This non-linked and participating life insurance policy aims to secure your child’s educational requirements and offers benefits at key milestones.