How to plan your child's future with smart investment?
July 21, 2020
Every parent wants to secure the future of their child. Building a strong financial cushion is possible only when your investment game is strong. Read further to know how you can invest in smart investment options for your child's future.
Being a parent is a complex role play. The kind of lifestyle and cost of living we have today will reach even higher in the future. Just like you can afford for your kid's present needs, you should be capable of doing the same for his/her future. This comes as no surprise that planning for your kid's future should be a priority. A responsible parent is the one who has secured the future of their child. It is better to invest in Child Savings Plan than to feel sorry, if you fail to fulfil your child's dreams in the long run.
As a parent, in creating a strong financial backup, you need to choose the right investment option. You will find a range of investment options in the market, but here are a few Child Investment Plans that you should consider for your child's future.
- Public Provident Fund or PPF: You can park your surplus cash in the PPF Account to help you earn returns at an attractive interest rate of 7.9 % per annum. Parents can contribute the money that their kids may have received in the form of a gift towards the PPF Account. This is a better way to initiate smart investment.
- Equity Investments: Saving for your child's higher education is every parent's responsibility as the education costs are surging rapidly. With Equity Investment, you can build adequate wealth faster than Fixed Deposits or Recurring Deposits, as they offer an attractive interest rate. Equities are risky, but you can do a monthly Systematic Investment Plan (SIP), where it could be affordable and help you build vital funds for your child's future. Later on, you can transition to low-risk funds like deposits or bonds. Liquidity becomes easy. It offers returns at a rate of 5% to 7% per annum.
- Term Insurance: When it comes to investing for kids, you should give equal weightage to insurance. Make sure you buy Term Insurance for the benefit of your child. Term Insurance assures you protection of the future of your child and your dependent family members in case of policyholder's unfortunate demise. This type of insurance offers a sum assured to the nominee; however, if the policyholder survives through the term period, no benefit can be availed.
- Health Insurance: Health cover is essential in today's world. The lifestyle choices, work pressure, diet and environment can pose major risks to our health. Healthcare costs are also rising. It is better to be prepared for the worst with Health Insurance that covers your child. A Health Insurance policy compensates for the medical costs of ailments or illnesses, thus safeguarding your savings.
- Sukanya Samriddhi Yojana or SSY: This scheme is for a girl child. It provides good returns at a rate of 7.6% per annum. You can apply for SSY scheme until your child becomes ten years old. The minimum and maximum amount for investment is Rs 250 and Rs 1.5 lakh, respectively. Parents can also claim tax deductions of up to Rs 1.5 lakh in a year under Section 80C of the Income Tax Act. The term period is 21 years. Partial withdrawal is permitted, once your girl child attains eight years of age.
- Gold ETFs: To ensure your child's bright future, you can invest in Gold Exchange Traded Funds (ETFs). You may not know about this, but it offers high liquidity. It is a Mutual Fund Unit where each unit represents 1g of gold.
These are some of the investment options that you can choose to secure your child's future. Today, the cost of raising a child is quite high; it is better to start investments early and not when your child is born. Choosing an investment plan depends on your risk appetite, earnings and age. Hence, it would help if you choose wisely.
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