Child Savings Plan in India

Best Child Savings Plan in India^≈

Disclaimer: ≈ Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is done in alphabetical order (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

What Are Child Savings Plans?

Child Savings Plans are financial products that offer the dual benefits of investment and insurance. These plans can help parents to build a corpus of funds for their child's future needs, such as education, marriage, or other major expenses, while providing life cover in the unfortunate event of the parent's death.

In the unfortunate event of your death, a child savings plan enables your child to receive a lump sum amount. Therefore, it could prove beneficial for the child with their education and other needs. You have the option to avail loans against the plan as well.

List of Child Savings Plans

Here are some of the best investment plans for children in India in 2024:

1. Systematic Investment Plans (SIPs)

   SIPs are a popular way to invest in market-linked funds like ULIP. They allow you to invest a fixed amount of money at regular intervals, such as monthly or quarterly. Hence, it is a good way to build wealth over time, even if you can only afford to invest a small amount each month.

   There are many different types of funds available. So, you can choose one that is appropriate for your child's age and financial goals. For example, you may want to invest in a children's education fund or a retirement fund.

2. Child ULIPs

   Child ULIPs are unit-linked insurance plans that offer both investment and insurance benefits. In other words, ULIPs are a good option if you want to provide financial security for your child and also save for their future.

   Child ULIPs invest in a mix of equity and debt securities. The equity portion of the investment has the potential to generate higher returns, but it also comes with more risk. The debt portion of the investment is less risky, but it also offers lower returns.

3. Sukanya Samriddhi Yojana (SSY)

   The Sukanya Samriddhi Yojana is a government-backed savings scheme for girl children. It offers a high interest rate of 8.0% compounded annually and provides tax benefits.

   SSY accounts can be opened for girls up to the age of 10 years. The minimum deposit is ₹250 and the maximum deposit is ₹1.5 lakh per year. The account matures when the girl turns 21 years old.

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4. Debt Funds

   Debt funds are funds that invest in fixed-income securities, such as bonds. They are a good option for investors who are looking for relatively low-risk investments with guaranteed returns.

   There are many different types of debt funds available, so you can choose one that is appropriate for your investment horizon and risk tolerance.

5. Recurring Deposits (RDs)

   RDs are a type of savings account that allows you to deposit a fixed amount of money each month for a predetermined period of time. You earn interest on your deposits, which is compounded over time.

   As a result, RDs provide you a good way to save for your child's future expenses, such as education or marriage. They are also a good option for investors who are looking for low-risk investments with guaranteed returns.

6. Public Provident Fund (PPF)

   The PPF is a government-backed savings scheme that offers tax benefits under 80C of the income tax and a high interest rate of 7.1%. It is a long-term investment option with a maturity period of 15 years. However, you can withdraw money from your PPF account after 5 years.

   PPF accounts can be opened by anyone above the age of 18 years. The minimum deposit is ₹500 and the maximum deposit is ₹1.5 lakh per year.

7. National Savings Certificates (NSCs)

   NSCs are government-backed savings certificates that offer an interest rate of 7.7% compounded annually. They are a good option for investors who are looking for low-risk investments with guaranteed returns.

   NSCs have a maturity period of 5 years. However, you can withdraw money from your NSC account after 3 years.

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Which Child Savings Plan is Right for You?

The best investment plan for your child will depend on your individual circumstances and financial goals. Definitely, if you are not sure which plan is right for you, it is a good idea to consult with a financial advisor.

Here are some things to consider when choosing an investment plan for your child:

• Your child's age and financial goals

• Your investment horizon

• Your risk tolerance

• Your budget

Once you have considered these factors, you can start to narrow down your choices and choose the investment plan that is right for you and your child.

What are the Things to Consider Before Choosing a Child Savings Plan? 

Undeniably, choosing a child savings plan is a crucial decision that can significantly impact your child's financial future. Here are some things to consider before selecting a plan:

• Purpose of the Plan: Determine the primary goal for the savings. Is it for education, marriage, a safety net, or some other purpose?

• Duration: Consider the time horizon until you'll need the funds. If your child is very young and you're saving for college or marriage, you have a longer time frame compared to someone whose child is already in their teens.

• Flexibility: Check if the plan allows for flexibility in terms of payment frequency, amount, and tenure. Can you increase or decrease the amount? Can you make lump-sum contributions?

• Returns and Performance: Look at the historical performance of the plan, especially if it's an investment-linked product. While past performance isn't indicative of future results, it can give you an idea of how the plan has fared.

• Tax Benefits: Some child savings plans offer tax benefits either on the invested amount, the returns, or both. Check the tax implications of your chosen plan.

• Liquidity: Consider how easy it is to withdraw money from the plan, especially in case of emergencies.

• Reputation of the Provider: Research the financial institution or company offering the plan. A reputable provider with a good track record can be a safer bet.

• Inflation: Consider the impact of inflation on your savings. Will the amount you're saving today be sufficient to cover future costs?

• Automatic Features: Some plans might offer features like automatic balance increases, which can help your savings keep pace with inflation or rising costs.

• Consultation: Consider consulting with a financial advisor or planner. They can provide personalized advice based on your financial situation and goals.

So, by carefully considering the above factors and doing thorough research, you can choose a child savings plan that best suits your child's future needs and your financial situation.

People also read: Sukanya Samriddhi Yojana Calculator

Conclusion

Child Savings Plans in India play an important role in securing a child's financial future. Given the rising costs of education, lifestyle, and other significant life events, it's necessary for parents and guardians to start early and choose the right savings plan. Hence, with proper planning and disciplined saving, these plans can provide a financial foundation for a child's future milestones. In short, it's not just about saving, it's about ensuring a brighter, more secure future for your child.