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7 Best Child Investment Plans In India

10 Apr 2024

Planning for the future financial security of a child is a challenging task. Individuals attempt to create a robust financial cushion for their children, but, at the hour of truth, find that the funds they have accumulated are not sufficient. Creating a financial backup for a child may require parents, not to invest in merely a single plan, but a few good child investment plans on the market today. The key to making investments to safeguard a child’s financial future is to make the appropriate choices of investment at the correct time. Like all investments, making plans for the future involve taking  stock of each individual requirement and the financial goals that are unique to particular parents and their children.

Children are the world to parents and they strive hard to give them the best. When it comes to their education and financially securing their future, timely investments need to be the top priority. The rise in education costs makes it important to invest for your child.
If you are a parent looking for the best investment options for kid’s future, you are at the right place. Our financial experts have identified some of the best investments for children.

What to Look For in a Child-Saving Plan

While most parents realize the requirement to save a corpus for the future of their children, they do not fully grasp the nature of what that corpus should account for. Hence, if parents, or one parent is earning a sufficient salary at present, enough to support their household and pay for the current educational and other needs of children, the same amount might not suffice in the future. 

As inflation may be on the downward trend, the cost of goods and services is still high, and expenses of the average household in India are only going to grow. For instance, the cost of higher education alone is on the rise, increasing at a rate of 10% to 12% per year. A case in point may be that an average Engineering course costs about Rs. 6 - 7 lakh for four years at present. In a few years, this may increase to Rs. 12 lakh. To take this a step further, if you have plans to send your child abroad for further education, the sky’s the limit at what you may have to spend. Here are some considerations while selecting the best saving plan for a child: 

  • Consider more than a single plan
  • Consider a plan that gives you enough of a corpus for potential educational expenses, health emergencies and other miscellaneous costs
  • Think of the rising rates of inflation and take into account additional expenses for this
  • Make a note of your present income and whether you can build some of your future children’s corpus from this
  • Consider long-term plans, with assured maturity amounts and as little risk as possible

Sukanya Samriddhi Scheme (Post Office)

The Sukanya Samriddhi Scheme is an Indian government initiative that encourages the parents to save for their girl child. The account can be opened at any post office till your daughter attains the age of 10 years. The minimum deposits are of Rs. 1000 and the maximum deposit of Rs 1.5 Lakh can be invested in this scheme every year.
The deposits can be made till the girl child attains 14 years and the maturity period of the account would be 21 years from the day of opening of account. The rate of interest is 8.6% that is compounded yearly. The scheme also allows partial withdrawals after the child attains 18 years of age.

The Post Office Scheme, for a boy child or girl child can be a good supplementary scheme, offering you less risk and assured long-term returns for the future expense needs of your children.

Make Investments in Gold

Gold always acts as perfect hedge against equity and during times when the markets are volatile. Parents make investments in gold in the form of ETF or E-Gold or gold mutual funds. Experts advice to avoid investments in physical form of gold to reduce the risk associated with physical storage of gold. 

Gold is a steady form of investment, especially for the long term and combats any inflation forces. It also offers a high degree of liquidity and can be useful to cash in on for a child’s expense needs in the future. 

Invest in Equity Mutual Funds

Equity mutual fund deposits rank high among the Children’s Investment Plan. The two main reasons for the same are the longer time frame of 10-15 years and the investment mode available. Equity funds have always had a history of generating about 12% to 15%  as annual returns.

Investments via Recurring Deposits

If you are looking for a low risk investment plan for your children’s future, then parents can consider recurring deposits as the interest rates for these are at a peak. One can lock the RDs and plan for your child’s future. Recurring deposits are offered by both banks as well as post offices in India. For example, an investment made of Rs. 1000 per month can fetch you Rs 2 Lakhs after 10 years. The official website of Indian post office also has a tool to check the returns that you can expect based on your monthly investment.
As child investment plans go, this is a good way to collect a corpus without risk involved.

Investments in PPF

If you are looking for a long term investment plan, choose PPF where the funds can be locked in for a period of 15 years. With a PPF calculator, you may determine the growth rate of your PPF investment over time given a specific interest rate and initial investment. A minimum of 1 Lakh can be invested per annum and the rate of interest is 8.75 % per annum. PPF accounts can be opened via Post offices or banks.

Investments in NSC

NSC or National Savings Certificate is the best and a proven method of saving for your child’s education. National saving certificates can be bought for a period of 5 years and the same can be reinvested on maturity. The present rate of interest offered is 8.10% and one can buy a certificate with is as less as Rs 100. The investments that are made of Rs 1 Lakh per annum also qualify for the IT rebate under the section 80C of Income Tax Act.

Invest in ULIP

Though many do not prefer ULIP schemes, these are the ideal choices for low-risk investors. One can expect returns of about 4% to 6% annually from any of the ULIP schemes. But do remember that ULIP schemes need to be the last option when compared to the other child investment plans that are available.

Do remember not to just invest in one scheme. Also, do not fall in the trap of insurance agents who might promise higher returns and encourage you to invest in wrong schemes.
Apart from financial investment, parents should also invest in building the skill sets of their children. Teach the concept of money to your children and encourage them to save for their own goals.

A Multi-Investment Approach

The best child saving plan for your child is dependent on unique financial future requirements, and investments should be done on this basis. Do remember not to just invest in one scheme. Also, do not fall in the trap of insurance agents who might promise higher returns and encourage you to invest in wrong schemes. Although many individuals look for plans with low-risk features, you can consider investing in equity while you are a young parent. You may get good returns and these can be re-invested to build an even larger corpus for your child’s future financial purposes. 

Apart from financial investment, parents should also invest in building the skill sets of their children. Teach the concept of money to your children and encourage them to save for their own goals.

Related Articles: How to save money for your Child's education? | What Are The Best Mutual Funds For Child 2023 | 8 mistakes to avoid when planning for your child's education

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