Investing in your child’s future – for both education and marriage in the present scenario is something that parents have to prepare for even before their children come into existence.
If you look at the expenses that having a child comes with- wellness, schooling, extracurricular, college, and marriage expense, you will easily find a number that belongs in the upper segment of double digit lakhs.
While it is almost impossible to save your way through it, what we recommend is that you should start investing in your child’s name just after you finish reading this article.
As you must have gotten the idea by now, the intent of this article is to help young parents get acquainted with the different investment modes which would help them in offering a better life to their children.
Without much delay, let us start with the investment types.
- Sukanya Samriddhi Account
The investment is made in the name of your minor girl child. The social welfare scheme aims at funding a girl child’s need like her marriage and education.
As her parents or guardian, you can open one account in the name of your child and benefit from the 8.5% tax free rate of interest.
In this scheme, you can invest in the range of Rs. 250 up toRs. 1.5 Lakhs in one financial year. SSA is a long term investment mode which is best suited for parents who are looking to gather funds for their child’s marriage or education.
Investing in Sukanya Samriddhi Account is not just exempted from tax under Section 80C but is also deemed to be the one that offers maximum returns when compared to its peers.
- PPF – Public Provident Fund
PPF is also considered to be one of the safest modes of investment made in your children’s name. The 8% pa tax free return that the mode of investment offers allows you to invest maximum of Rs. 1.5 Lakhs in the account – an amount which is not too heavy on the pocket.
Since the PPF maturity tenure is 15 years, it is like SSA, meant for the fulfillment of your long term goals.
- Fixed Deposits
If there is one investment mode that is preferred by risk averse investors after public provident fund, it is Fixed Deposits. While the minimum amount of investment that you need to make in fixed deposit is Rs. 100, the interest rate of 6 – 7%, which gets credited in your account on a monthly basis, makes it a stable form of long term investment.
Whats more? You can take a loan on your Fixed Deposit account.
Here are some Fixed Deposit features that have been keeping the interest of investors high:
l Chance to earn returns with high liquidity
l Monthly or Quarterly interest credited in bank account
l The benefit of Loan, Nomination, Foreclosure
l Auto renewal facility for an equal time duration
- Mutual Funds
We have saved the best for the last – Mutual Funds Investment.
Mutual Funds are the most profitable, high revenue generating investment mode out of the lot. When parents create a portfolio made of both debt and equity based mutual funds, they are able to generate funds meet their child’s short and long term goals.
The best part about starting a Mutual Fund investment in name of your child is that this mode gives you the benefit of investing through Systematic Investment Plan – a method of investing which can start as low as Rs. 500. What happens is that you invest in stable short and long term SIP plans like SBI SIP plan or Axis Mutual Fund and you put the payment on auto renewal, which would then take out Rs. 500 (or the amount you set) from your account on a monthly basis.
After your SIP tenure is met, you can either get the accumulated amount back in your account or reinvest it in order to grow your money and thus come closer to meeting the goals you have set for your children.
So here were the four investment modes that you can make in the name of your child. Do you know of any other investment type which can help guarantee your child’s prosperity, without being too hard on your pockets? Let us know in the comment section below.