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Best Investment Options to Ensure Financially Secured Future for Your Child

In India, most of the young children receive a very sub-standard quality of education due to a lack of skilled teachers. This has resulted in the parents suffering huge expenses to provide the best education to the children due to the crisis of demand and supply.

For parents, coping with the skyrocketing cost of education can be very difficult. Thus it is significant for parents to start the financial planning for their children way before they are born. To create a strong financial backup for your children the first question that arises is, when should you start to invest? Read further to know, how to ensure a financially secure future for your child.

When Should You Start Investing?

Your children's age plays a vital role in deciding when is the right time for you to start investing. You can gain a lot if you start investing right from the time your child is small. Investing right from an early age gives you the advantage to invest less. Moreover, it provides you with a longer tenure to accumulate your funds and also provides the benefit of the power of compounding. The investment growth also helps you to meet the higher education cost of your children.

Best Investment Options Available to Secure Your Child’s Future

Taking into consideration the age of your children, here we have mentioned some of the best investment options you can consider investing in to create a financial cushion for your child.

Equity Mutual Fund

For an individual whose child is young and who has at least 15-20 years to retire should start investing in equity mutual funds. Investing in equity securities while being young can help you to overcome the market volatility in the long-term and will also provide an opportunity to gain maximum return on investment. Equity mutual funds are high-risk investment funds, which the main objective to create long-term capital returns and wealth creation. The parents can also create an equity portfolio specifically for the child’s education. This can be done by opening an account for minor and opting for a systematic investment plan.  With the help of SIP, you can continue to invest a small amount over a long-term period and can gain a profitable return on investment.

Public Provident Fund

Even though the interest rate in PPF is reduced by the government, it is still preferred by the parents. Deposits in public provident encourage discipline, as one cannot withdraw the funds up till the completion of 15 years maturity period. Moreover, it also offers the benefit of an EEE (exempt, exempt, exempt) tax waiver. Since the principal amount, interest earned on it, and the maturity proceeds are tax exempted, it can help you to create a corpus in the long-term. As this is a government-backed investment plan it is one of the safest options of investment available in the market. the current rate of interest offered by PPF is 7.9%. In order to create a strong portfolio you must have a good mix of investments like PPF and unit liked insurance plan (ULIP) for your child’s future.

Sukanya Samriddhi Yojana

If you have a girl child, then this is probably the best child investment plan option for you. Suknaya Samriddhi Yojana is a deposit scheme, which was launched by the government of India specifically for the female children under the campaign of ‘Beti Bachao Beti Padao’. The scheme carries a current interest rate of 7.6%. the parent of a girl child can open this scheme in banks or post-office anytime up to the age the girl child turns 10 years old. The account remains operative for 21 years from the date of initiation or till the time the girl decides to get married (18 years of age). Moreover, the plan also allows withdrawing 50% of the accumulated amount to fund the higher education of the girl child. 

Unit-Linked Insurance Plan

ULIP plans are one of the best investment options to secure the financial future of your child. The plan not only provides an opportunity to create a fund by investing in market liked securities like equity or debt but also provides insurance coverage to the child in case of an eventuality. with the ULIP plan, you can ensure insurance protection and investment returns for your child in the long-term. As a long-term investment cum insurance plan, it helps you to deal with the increasing inflation rate in the future and also helps you to take care of your child’s higher education.

Debt Mutual Fund

This is a lucrative option to park your money, specifically if your children are already preparing to go to college. Debt mutual funds are investment instruments wherein the money is majorly invested in securities like government securities, treasury bills, corporate bonds, etc. debt mutual funds have moderate risk and is more stable as compared to equity instruments as these securities offer a fixed rate of interest. If you have a moderate risk appetite or if you want to gain a regular and stable return on investment, then this is the best child investment plan option available for you.  

The Bottom Line!

All these options mentioned above provides you three important guideline. First, start doing investment planning as early as possible. Second, based on your earning capacity and age access your risk appetite. Third, track and revise your investments from time to time. By keeping all these options in mind you can surely create a better future for your child.

Written By: PolicyBazaar - Updated: 26 November 2020
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