Every parent wishes for their child to have a better future—better education, career, and lifestyle. But to make this dream come true, love and upbringing alone are not enough, but financial planning and investments are also required. Investing money on time and in the right way can make your children’s future secure and independent.
In this article, we will learn how to invest for your children, when to invest, in which options, and what things should be kept in mind while investing.
Why is investment needed for children?
Increasing education costs
Education has become very expensive in today’s time. College fees, coaching for competitive exams, studying abroad—all these expenses can go up to lakhs of rupees.
Inflation
Inflation reduces the purchasing power of your money every year. What is possible for ₹5 lakh today, can become an expense of more than ₹10 lakh after 10 years.
Independent future
Investing can help you make your children financially independent so that they don’t have to take loans.
When and how to start investing?
- Start Early
If you start investing right from the birth of your child, you get time to build a large corpus by making small monthly investments. The magic of compounding is that investments grow faster with more time.
- Set Clear Goals
You must first decide the purpose for which you are investing:
- Schooling
- Higher education
- Studying abroad
Top investment options for children
Public Provident Fund (PPF)
- Tenure: 15 years
- Interest rate: Fixed by the government, usually 7–8%
- Tax benefits: Tax exemption under section 80C
- Risk: Very low
- Recommendation: Open a PPF account in the name of the children and invest for the long term.
Sukanya Samriddhi Yojana (SSY)
- Benefits: Only for daughters
- Interest rate: Around 8%
- Lock-in period: Till the girl child turns 21
- Tax benefits: EEE (Exempt-Exempt-Exempt) category
- Recommendation: If you have a daughter, this is an excellent scheme.
Systematic Investment Plan (SIP) – in Mutual Funds
- Returns: Up to 10–14% (in the long term)
- Risk: Market based, but the risk reduces in the long run
- Flexibility: Can start or stop investing anytime
- Tip: Build a large corpus by investing small monthly investments
Child Plan Insurance Policy
- Benefits: Both protection and savings for children
- Premium: Fixed
- Rating: Read carefully, some plans offer very low returns
- Tip: If you want a certain amount along with protection, you can choose this option.
Fixed Deposit (FD) – In the name of children
- Risk: Nil
- Return: 6–7%
- Taxation: Tax applicable on interest
- Recommended: Suitable for short term goals
Gold – Digital or Sovereign Gold Bond
- Benefits: Better protection against inflation
- Return: Between 6–8%
- Recommended: Suitable for children’s marriage or long term investment
Things to keep in mind while investing
- Keep the objective and time frame clear
- Decide the objective and time frame of every investment—e.g., ₹20 lakh is needed for child’s college fees in 18 years.
Diversification
- Don’t keep your investments in one place. Make a mix of PPF, SIP, SSY etc.
Keep insurance separate
- Keep insurance and investments separate. Term insurance is important for protecting children’s future.
Review every year
- Evaluate your portfolio every year. Make changes if needed.
Teach your children too
- When the children are a little older, start teaching them about investing so that they understand the responsibility too.
An example: 15-year investment plan
- Suppose you have a one-year-old daughter and you want to create a corpus of ₹25 lakh by the time she turns 18.
- Options Monthly investment Estimated annual return Fund after 17 years
- SIP (Equity Fund) ₹5,000 12% Around ₹25.5 lakh
- PPF ₹3,000 7.5% Around ₹11 lakh
- SSY (for daughter) ₹2,000 8% Around ₹9 lakh
Thus, with a combined plan, you can create a corpus of up to ₹30 lakh.
Conclusion
Investing for your children’s future is not just a financial decision, but it is also a symbol of your love and responsibility. An early start, right planning, and disciplined investing can help you give your children a secure, independent, and successful life.
A small step today can become a big flight for your child tomorrow.
Add a Comment