Almost every parent wants to offer their children a stable life so they can live comfortably. For this, they have to invest in a child's future, and undoubtedly, numerous options are available in India. However, choosing the best child investment plans is quite daunting. So, let's discuss the best child investment plans in India that will assist you in making the right decision for your child's future.
List of Best Child Investment Plans in India
1. Sukanya Samriddhi Scheme (Post Office)
• It is the best investment plan for girl child in India Initiated by the Indian government to promote savings for girl children.
• The account opens at any post office until the child turns 10.
• Minimum deposit: Rs. 1000; Maximum deposit: Rs. 1.5 Lakh annually.
• Deposits are allowed until the girl reaches 14, with a 21-year maturity period.
• Annual interest rate: 8.6%, compounded yearly.
• Partial withdrawals are permitted after the child turns 18.
2. Make Investments in Gold
• Non-depreciating nature makes gold an excellent hedge against inflation.
• Physical forms like jewelry and coins are popular, but digital options are gaining traction.
• Digital alternatives include Gold ETFs, SGBs, and gold mutual funds.
• Safer digital investments as they incur no storage or security costs, eliminating wastage charges.
• Digital gold is more liquid; ETF or mutual fund units can be sold on the stock exchange.
• Gold serves as a perfect hedge against equity, especially during market volatility.
• Parents opt for ETFs, E-Gold, or gold mutual funds over physical gold to reduce storage risks.
• Gold proves a steady, long-term investment, combating inflation forces.
• Offers high liquidity and can be tapped for a child's future expenses.
• Acts as a reliable asset to cash in on when needed, ensuring financial stability.
3. Invest in Equity Mutual Funds
• Mutual funds pose risks but offer high returns, making them popular for children's investments.
• Two primary investment options: lump sum payments or Systematic Investment Plans (SIP).
• SIP deducts a fixed amount monthly, invested in a professionally managed mutual fund, providing a disciplined investment approach.
• Specialized mutual fund plans are designed for children, often hybrid, with varying equity and debt allocations based on risk tolerance.
• Widely recognized as one of the superb investment options for kids due to potential returns and flexibility.
• Equity mutual funds stand out in Children's Investment Plans thanks to their 10-15-year timeframe.
• Equities historically generate annual returns of 12% to 15%, highlighting their potential for substantial growth over time.
• Mutual funds offer diverse investment methods suitable for various risk appetites.
• Equity funds, with their track record, provide a perfect option for parents looking to secure their children's financial future.
4. Investments via Recurring Deposits
• This is another best investment plan for child future for parents seeking low-risk investment options.
• Recurring deposits in banks and post offices boast peak interest rates.
• Example: Rs. 1000 monthly investment can yield Rs. 2 Lakhs in 10 years.
• Indian post office website offers a tool for checking expected returns based on monthly investments.
• A secure method to accumulate a corpus for your child's future without risk.
5. Investments in PPF
• If you need a long-term investment plan, select PPF, where the capital will be locked for 15 years.
• You can invest around 1 Lakh annually with an 8.75% interest rate.
• It can be opened via Post Offices or banks.
6. Investments in NSC
• A National Savings Certificate is the best method to save for your child's education or future.
• The funds in NSC are locked for 5 years; you can reinvest them when it matures.
• Certificates can be purchased with as little as Rs. 100.
• Investments up to Rs. 1 Lakh yearly qualify for IT rebate under Section 80C of the Income Tax Act.
7. Bank Deposits – FD and RD
• FDs offer safety and high returns, suitable for long-term child investments.
• Involves minimal risk with an interest rate unaffected by market fluctuations.
• Almost all banks provide FD and RD schemes for children, some with insurance cover.
• RDs involve regular small investments with fixed interest but may offer lower returns than FDs.
8. Insurance Policies
• There are many insurance policies tailored for children, these policies include life cover and death benefits.
• Policyholders pay regular premiums, with the invested amount compounding over time.
• At maturity, a lump sum is returned, aiding major expenses like education and marriage.
• Policies deliver tax benefits under various sections of the Income Tax Act 1961.
• All benefits, including death benefits and maturity amounts, are tax-free up to specific limits.
9. Public Provident Fund (PPF)
• The Public Provident Fund is a government best investment plan for child future where the rate of interest is declared quarterly.
• It delivers a higher rate of interest than FD or saving accounts with a maturity period of 15 years.
• It has a long lock-in period, making it a perfect tool for long-term children's savings.
10. Mutual Funds
• Mutual funds pose risks but offer high returns.
• Two ways to invest: lump sum payment or Systematic Investment Plan (SIP).
• SIP deducts a fixed amount monthly, invested in a managed mutual fund.
• Mutual funds have child-specific plans, often hybrid with equity and debt options.
• Allocation is customizable based on risk tolerance.
• Considered one of the best investments for kids, combining growth potential and risk management.
11. Unit Linked Insurance Plans (ULIPs)
• Though not favored by many, ULIPs are ideal for low-risk investors.
• Expected returns range from 4% to 6% annually in ULIP schemes.
• These plans are a mixture of both insurance and investment.
• Like regular insurance policies, ULIPs involve paying periodic premiums.
• Supports educational or marriage expenses.
• In case of the policyholder's demise, the child receives a lump sum or regular payments.
When is the Perfect Time to Start Saving for Your Children?
Commencing investments for your children early can significantly leverage the power of compounding. The longer the investment horizon, the greater the potential for a substantial corpus to materialize over time. Many parents opt to initiate savings for their children right from birth or during early childhood, allowing for an extended investment period that aids in building a sizable fund by the time the child reaches adulthood.
However, before committing to children's savings, it is crucial to assess your own financial stability. Ensure the presence of a robust emergency fund, adept management of personal finances, and a comfortable ability to allocate a portion of your income toward your children's savings. Identifying specific goals, such as funding education or supporting career aspirations, is pivotal for goal-based savings. Once these objectives are clear, crafting a savings plan and investing accordingly becomes more straightforward.
Education, being a substantial expense, demands prudent planning well in advance. Researching anticipated higher education costs and factoring in inflation allows for the determination of a monthly savings amount. In essence, a thoughtful and early approach to children's savings harnesses the benefits of compounding and ensures a methodical and goal-oriented investment strategy.
Conclusion
When deciding to choose the best child investment plans, ensure to consider the child’s future. All the best investment plan for child future we discussed above can generate wealth and be used to meet all child-related expenses. So, evaluate each option's pros and cons thoroughly. It is always best to seek advice from financial experts before deciding.
