Want to plan your Child’s Future Bright? Learn where to Invest

• 2 May 2020 | 1225 Views | By Mint2Save

Everyone aims the best of everything for their children. From health to education to the future, there is almost no stone unturned by the parents. Like all parents, you might also be concerned about the future of your child, and there’s no doubt you’ll choose the best at any cost.

But when it comes to education, there is a lot of inflation faced, and alone savings cannot bear that expense for you. Today, to survive this, financial planning and an on-time precise decision can help one. With those ideas and opinions, you can secure your child’s future.

The cost of education in India is getting higher than expected. With an astounding rise of over 175 per cent in general education over the past decade, there has also been a 96 per cent rise in professional training.

With an average rise of around 8.5%, the prices are expected to reach the sky in a very soon span. Through these kinds of decisions, it is complicated for parents to estimate a cost for their child’s education, which will not bring them to any problems.

Where should I invest for my child’s future?

There are several plans or offers available in the market, which varies with different factors. But there are few investment options available wherein you can ensure a safe investment.

1. Mutual Funds Scheme

Mutual funds are one of the safest and widely used options that are reliable to compete with the price increase. The most significant advantage of mutual funds is they are managed by professionals and come with additional benefits like tax advantage, diversification under various sectors. 

The mutual funds have grand schemes for children under solution-oriented projects, which are a blend of either equity-oriented or debt-oriented. The allocation may be in the ratio of 65:35 or even vice versa. 

The total investments may be a lump or through SIP i.e., Systematic Investment Plans. To opt for SIP means the risk is adjusted for achieving better goals for the child.

Some of the merits of such solutions are they are ideal for long terms. The investments can be made by parents or grandparents as well. Individual accident insurance coverage can also be included in some of the schemes.

However, these kinds of risks are not recommended for a shorter period, and also they depend on market fluctuation, and thus, it does not offer guaranteed returns.

2. Child Insurance Plans

Though it is always recommended to have insurance and investment on a separate level, it is recommended to have child insurance as well because it is still a primary concern of a parent to have a child’s safety. It is sure to think that if something happens to the parent, then they should have the necessary substitutes for their children.

Child insurance can also be termed as insurance cum investment products. The parents are also included in such plans, and the entire beneficiary amount will be added to the child’s benefit in case the parent dies.

Under such unfortunate circumstances, the lump sum will be provided to the child along with the specific interval gaps as defined in the policy. One such strategy is child UPI’s where the insurance company invests a part of the premium and the balance obtained after that is utilized.

One of the advantages of these insurance plans is that these plans can be invested as per the needs and risks. These kinds of threats are not subjected to taxation, and also alternating between these funds is possible.

There are some demerits of these plans, also like these investments are subject to market risks and hence may not be suitable for some. Moreover, these types of investments are fixed for five long years.

3. Public Provident Fund(PPF)

PPF is a scheme offered by the Government that is used for investment and interest rates, which is locked for a fixed period of 15 years and can be extended for a block of five years with or without any extra contribution.

The interest rate varies in every quarter, and the current price is estimated at 7.90%. The PPF can be issued in the post office, private or public banks as well. They can open a child’s early age, and the maturity period can be of their marriage or higher education.

What is the best investment for a child’s education?

The advantages of investing in PPF are that it offers guaranteed return as per the interest rate issued by the Government. Also, one can withdraw a partial amount after seven years of investment. And this interest earned is tax-free. Hence, they are arguably one of the best investment for a child’s higher education.

Another considerable disadvantage of the PPF is that it is locked for 15 years. Under any emergency reasons also, the amount can be withdrawn if the amount completes five years. Also, NRI and HUF cannot claim these types of policies.

4. Sukanya Samridhi Yojana

This is a Government based scheme for “Beti Bachao, Beti Padhao Yojana,”  wherein the parents or legal guardians can open the account for a girl child under ten years. There can be a maximum of two girl’s names enrolled in a single-family. It offers an interest rate of around 8.4 per cent, which may be renewed or even revised by the Government every quarter.

Some of the advantages are that these types of schemes offer better returns. The account matures once the girl is of 21 years of age or on her marriage, whichever event is early. Also, once the girl reaches 18 years of age, the partial amount can be withdrawn.

One of the disadvantages of opting for this is that these schemes are restricted for girl children only. The interest rate is also not fixed, and the maturity period is comparatively very long and thus not a suitable option for people looking for short terms.

Investments are a personal choice, and thus a proper background check of the pros and cons without blindly following a trend is expected. To ensure an appropriate test, it is expected to have proper counselling of the professionals that can guide you properly.