10 Investments For Children Future
Financial expenditure for children’s education and basic needs like marriage is a vital part of any family expenditure.
One of the biggest responsibilities of a parent is to provide adequate financial assistance to children until they reach a self earning stage.
For Parents, to guarantee the return and safeguard the hard earn money, it is advisable to diversify the investments among the below-mentioned investment options for the children. After understanding about different plans to choosing the right investment option, considering the fact of high financial expenditure for the kid’s future, paying small fees for guidance from a qualified financial adviser, who can guide to select a suitable investment option, will be worth it.
In this article, we are covering the 10 investment options for children’s future in India, which can be started at a younger age and provide adequate returns during the time of requirement. Most of the children’s investment plans can start very easily and provides tax benefits to the parents.
The top 10 investment options are listed below.
- Direct Equity Investment.
- Mutual Funds.
- Gold Saving.
- Bonds and Debt investments.
- Fixed Deposit in Banks.
- Life insurance plan for children.
- Public Provident Fund(PPF).
- Sukanya Samriddhi Account (SSA).
- Privet child investment plans.
- SIP – Systematic Investment Plan.
The best gift a parent can offer for a kid’s birthday is a promising a secure financial future by investing in suitable investment instruments during their younger age birthday. Foreseeing the inflection rate and expected financial needs of the kids in the future and identifying the suitable investment plans is the talent of a smart parent.
Only the Basic details of the different plan are covered in this article, if you would like to know the further details of each plan, click on the respective links below.
Equity Investment
Parents can open a Demat account for their children and start acquiring stocks and invest it for the children as in the long run equity market outperform any other investments. Equity investment in blue-chip companies is the best investment plan for higher returns for the children. In addition, if a parent doesn’t want to open a separate Demat account for the kids, they can start purchase the quality stocks and hold them in their account, and later they can transfer it to the children’s account as a gift to them.
- These stocks children can use for their financial needs in the future.
- It is advisable to have adequate knowledge in equity and share markets before considering it as a prime choice for a child’s future.
Mutual Funds
Mutual funds are one of the best investment options for a parent, who doesn’t have much knowledge in the equity market, for their kid’s investment as it provides a guaranteed return in long run. Early starting of a mutual fund helps parents to achieve future long-term goals like marriage, child’s education, etc.
- A parent can start investing monthly as small amount as Rs. 500 per month in SIP mode or as a lump-sum amount in the kid’s name.
- It is ideal to have hybrid mutual funds if it is for the children.
Gold Saving
Gold is a guaranteed return investment option for children’s future. A parent can invest in Gold either by purchasing the physical gold like coins or ornaments or electronic gold like Gold ETFs (Exchange Traded Funds) or SGB (Sovereign Gold Bond). It can be liquidated easily at any time, in the need of money.
- Considering the factor of safekeeping, it is ideal to purchase the electronic gold, if it is for the long term.
- A parent can purchase the electronics gold online through a trading account of a trade broker and store it in the Demat account.
Bonds and Debt investments
As Bonds and Debt provide the yearly guaranteed return, which will be higher than a bank FD, it is the best option for a parent to invest for the future of the children. A parent can buy the bonds through the trading account just like other equities and stores in the Demat account for the kid’s future. Parents can also use some of these investments for Tax exemption purposes.
- There are also tax-free government bonds available, which will provide the benefit of tax exemption for the parents.
- Investments in short-term debt funds are the ideal options to meets the child’s recurring expenses like school fees.
- Short-term funds are flexible as they can easily liquidate as and whenever required.
Fixed Deposit in Banks
In India, Bank Fixed Deposit is the most popular investment option for most parents for children as it offers a risk-free guaranteed fixed percentage of returns. Fixed deposits can start for any period of time and they can be broken at any time to meet the financial needs of the children. It is better to have multiple small amounts of FD than a single large amount of FD as it helps to break one or two of these small FD’s, instead of a single large one if any financial emergency comes in between and other small FD’s can continue smoothly.
- Parents can also start the Recurring deposit in the name of the children so that it will offer the corpus over the long run.
- There are also much tax exempted fixed deposits for 5-years, which will offer a guaranteed return to the children and tax exemption to the parents if the children are minor.
- On maturity of the FD (principal + interest), parents can easily renew it online or offline for long-term growth.
Life insurance plan for children
It is ideal for a parent to start a life insurance plan for the children as it provides insurance coverage for them along with the investment. Most of the children insurance plan provides a corpus for the child during the maturity, it can be used for their higher education and other financial needs. There are also have few dedicated investment plans available for child education in India. One-time investment plans for children in LIC is easy to start and invest in.
- An important factor that needs to consider during the selection of a plan is that an insurance policy needs to cover the financial needs of a child even in the absence of parents.
- Parents can start the insurance policy online in the LIC web-portal or through the portal of other private insurers or directly from their offices.
- Most of the insurance plan help to save tax to the parents under 80C of Income Tax act, if the kids are minor.
Public Provident Fund (PPF)
An easy and secure investment option for the long-term goals of the children is to start Public Provident Fund during the early age of the children. A parent can start the account at any age of the children and earns a fixed rate of interest (Yearly it very) which will be much higher than a Fixed Deposit can offer. The account can start through any nationalized bank or through the post office. PPF is one of the best child investment plans in the post office.
- The minimum lock-in period is 15 years and it can extend in blocks of 5 years.
- To maintain the account parent need to invest a minimum of Rs. 500 in an FY.
- Parents can also claim tax exemption under 80C if the child is a minor, maximum up to 1.5 lakh.
Sukanya Samriddhi Account (SSA)
Sukanya Samriddhi Account (SSA) is one of the best choices for a parent who had a girl child under 10 years. It is the best child investment plans of the government for the girl child. It offers a guaranteed fixed return higher than a PPF account. A parent can start the SSA account in the name of the girl child through the authorized bank or through the post office. A girl child will be the primary account holder and a parent/legal guardian will be the joint account holder.
- The minimum deposit amount in a financial year is only Rs. 250.
- A parent can claim tax exemption for the deposited amount into the SSA account maximum of up to 1.5 lakhs in a financial year.
- SSA account has a minimum tenure of 15 years and needs to become 21 years of age.
- The amount can be withdrawn only if it is matured or for the financial need of the girl child like higher education or marriage.
Privet child investment plans.
There are many private companies like Bajaj, Birla, and banks like ICICI, SBI offers many child investment plans for the child’s higher education and other future financial needs. These investment schemes can start just like a mutual fund from the investment agencies. There is much one-time investment plan for newborn babies in India which will guarantee the financial needs for the higher education and marriage needs of the kids. Most of the investment brokers provide the child investment plan calculator on their website which will help to calculate the returns very easily.
- Most of the plans can start at any age of the children and even for a small period of 30 days.
- Most of the plans allow partial withdrawal even before the maturity period.
- Most of the plans have the premium payments in monthly or quarterly and the payments can be done through the standing instruction from the banks.
Few most popular child investment schemes in India.
- TATA AIA Super Achiever Plan.
- Max life Shiksha plus super plan.
- PND Metlife smart child plan.
- SBI Life – Smart Scholar.
- Canara HSBC Child plan.
SIP – Systematic Investment Plan
The best and easy way for parents to build a corpus for the children’s financial need is to start Systematic Investment Plans (SIPs) in the name of children. Debt or Hybrid Mutual fund SIPs can be a good option for parents for the kid’s education and marriage needs as they offer decent returns even when markets are down. If parents need higher returns from the SIP it is ideal to select equity mutual funds with a diversified portfolio.
- The advantage of SIP Investment is that it can be started with a small sum of Rs 500 in a month.
- As SIP investment works on the basis of Rupee cost averaging, parents need not worry about the market movements.
- The prime factor that needs to consider for selecting the fund for the SIP is the overhead other charges of the funds.
CONCLUSION
Start investing and saving for the children as early in life is the only way to build an adequate corpus for the future of the children. While a parent planning for an investment for the children it is important to make the right investment choices. To make the right investment choice, parents can get help from the financial advisers available with the fund managing companies.
The Parents need to give at most priority to secure and provide adequate financial support to children for their education and other basic needs. Proper financial planning and investments help parents to handle the financial needs of the children without compromising their financial current needs.
Currently, there are several investment plans that can be started for the children and provide considerable returns for their future. Well, the thought-out financial decision will offer a hassle-free future for the parents.
Thanks & Regards
Harry.
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