No one can ever love a child like his parents. Every parent tries to take utmost care of their child in every possible manner, be it physically, mentally or financially. Becoming a parent is one of the greatest experiences that one experiences throughout the life.
However, it is a universally known fact that after becoming a parent, the expenses do grow. With the growing age of the child, he expenses also start rising. This is where planning and investments comes into consideration. The growing responsibilities of the parents towards their child as well as the increasing financial expenses all kick in, all at once. While it is pretty evident that you cannot run away from your responsibilities as a parent, a planned and smart investment can help you in being prepared for the current as well as future expenses.
Investing for your child is of key importance and should be done after understanding all the risks and benefits. Some of the major expenses towards a child for the parents include medical costs, educational expenses and finally marriage. These are common expenses that every individual encounter during his parenting journey. Therefore, these are usually the common investment goals for most of the parents.
Investing for your children has no specific time limit, some start as soon as a child is born, on the other hand there are many who start even before that. However, the sooner you start, the better it is because the corpus and compounding effect keeps on rising with time.
1. Fixed Deposits and Recurring Deposits
These are amongst the most common investment options, considering the fact that the risk in these is almost negligible. However, the returns are also on the lower side. In fixed deposits you can invest a lumpsum amount and earn interest on the same, whereas in case of recurring deposit you deposit a fixed amount every month and earn interest on the same.
However, the income earned from interest in both the cases is liable to tax, Since the return is low and taxable these options are usually preferred for short term investments.
2. Public Provident Fund
Public Provident Fund or PPF is a long term investment option which is risk free and tax free, however, it has a lock in period of 15 years. Public Provident Fund is exempted under the Section 80C of the Income Tax Act and has a combined limit of INR 1.5 Lakhs per year for the parent and the minor child.
It is usually retained as a debt portion in your portfolio.
3. Sukanya Samriddhi Scheme
The Sukanya Samriddhi Scheme is limited to girl child with a maximum entering age capped at 9 years. This scheme has a lock in period of 21 years and is exempted from taxes under the Section 80C of the Income Tax Act. The ceiling limit under this scheme is 1.5 lakhs per year with variable interest rates.
This scheme can be considered as a good long term investment option if you have a girl child.
4. Mutual Funds
This is one of the most trending investment choices in the current times due to fact that it leaves you usually with a high corpus. The return on mutual funds are not exempted and are usually taxable but the higher returns usually balance those taxes. It provides a balance between equity and debt instruments as per your choice.
5. Child Insurance Plans
A child insurance plan can be a good option for securing your child’s future because in case of the death of the policy holder (Parent), the insurance company pays off a lumpsum amount and also waives off all the future installments of premium. This can be a good option to secure the future of your child.
6. Stocks and ETFs
Stocks are the investment instrument with the added advantages of high liquidity and very high returns. However, they do come with a set of risks. If you want to invest in stocks for long term Market Neuron can help you. It is based on an event or theme which is expected to provide returns in the future.
ETFs or Exchange Traded Funds can also be considered as a good investment option. They are very much similar to stocks and are transparent investment option.
7. Gold ETFs
Gold ETF is basically an investment in Gold without the risks of physical gold. It can be referred to as paper gold. These are highly liquid and can be bought or sold like any other mutual fund, where one unit of the mutual fund usually equals to one gram of gold. The returns are usually low but the emotional value associated with them is very high.
Conclusion
Planning a perfect investment as per your needs and specific requirement is a very tedious job as it requires you to understand the investment instrument considering all the associated risks. An investment advisor comes in handy for all such situations, and guides you with the various investment options available depending on your investment horizon and investment goal. A diversified portfolio usually helps to balance out the risks in case of such investments.
