When you start planning for your
child's future, invest early as you can because this is the better option to
save more through the investment. If you invest early, it will give you a
greater horizon to meet your financial goals such as your child's education and
marriage and can also lead to a bigger accumulation.
Similarly, parents need to know
what corpus value is needed during their child's life and when they will need
it based on their future plans for the child. Choose the right investment
options so that your portfolio moves towards each financial goal you set for a
better future for your children.
Here's how to invest the money:
1. Stock: It's
important for parents to start teaching their kids about managing their
finances from an early age, and when it comes to stocks, the goal should be no
different. Even though the stock market is known to be volatile, equity as an
asset will help you meet your financial goals in the long term even after
adjusting for inflation. So, instead of giving your child your entire pocket
money every month, why not save some and invest it in stocks on his behalf?
This will help build a portfolio for them over time.
2. Fixed Deposits: Fixed deposits offer investors a higher rate of
interest than a traditional savings bank account, and opening such an account
is quick and easy. For example, you can open a new Fixed Deposit for each
birthday of your child. This would be a great way to develop the habit of
saving.
3. Mutual Funds: Mutual funds have always been a popular investment
vehicle for investors as they are easy to understand and a great option for
investors with limited knowledge, time or money. It is important to maintain
your asset allocation by investing in the right basket of mutual funds. Mutual
funds typically buy and sell securities in large quantities, giving investors
the advantage of lower trading costs. Anyone can start with a minimum
investment amount of Rs. 500 in a Systematic Investment Plan (SIP) on a regular
basis. A person, who believes that SIP in equity funds is one of the better
ways to invest for a child's long-term needs, says, "A SIP of Rs. 5,000
started in May 2001 is now over Rs. 25 lakhs today."
4. Life insurance: Life insurance cover is an important component
of your financial planning as you can nominate your family members - even
children - as beneficiaries in your insurance plan. By doing so, your children
are set up for a strong financial future and their financial needs are met as
and when they arise. Absence of one parent can make things very difficult for
the children and the spouse, but buying life insurance protects everyone from
your spouse to your children. Insurance can help pay for any immediate expense,
be it medical bills, home loan EMIs or more.
5. Sukanya Deposit: The Sukanya Samriddhi Yojana (SSY) is a small deposit scheme by the Ministry of Finance exclusively for a girl child. SSY was launched by the Hon'ble Prime Minister on 22nd January 2015 as a part of the Beti Bachao Beti Padhao campaign. The scheme is meant to meet the education and marriage expenses of a girl child. Notified by the Government of India on 14th December 2014, this scheme encourages parents to build a fund for the future education and marriage expenses of their female child.
Benefits
- The Minimum Investment is ₹250 per annum; The Maximum Investment is ₹1,50,000 per annum. The Maturity Period is 21 years.
- At present, SSY has several tax benefits and the highest rate of interest among all the Small Savings Schemes i.e., 7.6%.
- The principal amount deposited, interest earned during the entire tenure, and maturity benefits are tax-exempt under Section 80C.
- The account can be transferred anywhere in India from one post office/Bank to another.
- Interest payment even after maturity if the account is not closed.
- A premature withdrawal of up to 50% of investment is allowed after the child gains the age of 18 years even if she is not getting married.
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