types of child investment plans

Types of child investment plans

Given the rising cost of education, giving your children the best education possible should be your top priority as parents.

By investing early in different child investment plans, you can create a sizable education corpus for all your child’s needs. Here are the different types of child investment plans.

Less is more

1. Equity mutual funds

When your child is still small and you have at least 15 to 20 years till retirement, it is excellent to begin investing in equities mutual funds.

This enables you to withstand shocks like stock market collapses and volatility. Equity investing is not for everyone since it demands technical expertise and the capacity to keep current.

To choose equities mutual funds is, therefore, the better option. 

These are managed by professionals who are aware of how to choose the least hazardous stocks while still making sure that your money grows over time.

You may put together a portfolio of equity mutual funds just for your child’s schooling. When your child is 4 or 5 years old, you may accomplish this by creating an account specifically for children and choosing Systematic Investment Plans (SIPs) in risky products like equities mutual funds.

Then, when you and your child become older, you can take a more conservative approach.

2. Public provident fund (PPF)

Parents continue to favor PPF even after the government lowered interest rates on provident fund accounts. Because you cannot take the corpus until the conclusion of the 15-year maturity period, PPF deposits promote discipline.

You may build your corpus for educational purposes because the principle, interest, and total maturity amount are all tax-free.

You may rest certain that your money is secure because the government backs PPFs. However, because PPFs’ official interest rates have already decreased, relying only on them can result in a cash flow problem.

Build your portfolio to provide larger returns to prevent this. For your child’s future, choose a well-balanced investment portfolio that includes both PPFs and Unit Linked Insurance Plans (ULIPS).

3. Direct equity

Direct equity, sometimes referred to as stock investing, is perhaps the most effective investment strategy. You get a stake in a company when you buy stock in it.

You are personally responsible for funding the business’s growth and advancement. You need to have the necessary time and market knowledge to make money from your investment.

Publicly traded companies provide their stocks on reputable stock markets. Stocks are the finest long-term investments. You must actively manage your assets since several economic and commercial factors influence shares.

You must also be aware that profits are not guaranteed, and you must be willing to assume the associated risks.

4. Fixed deposits

Banks and other financial organizations provide FDs as one sort of investment. You earn a fixed rate of interest for a predetermined amount of time after making a deposit.

Compared to mutual funds and equities, fixed deposits offer complete capital protection and guaranteed returns.

You give in, though, since the rewards remain the same. The banks establish the interest rate on fixed deposits by the RBI’s policy review decisions, and it changes depending on the status of the economy.

Despite being typically locked-in investments, fixed deposits are commonly accepted as collateral for loans or overdraft facilities by investors. A fixed deposit with tax advantages and a 5-year lock-in is also available.

5. Employee provident fund

The EPF is one of the investment vehicles geared toward retirement, and it enables salaried individuals to take advantage of a tax credit under Section 80C of the Income Tax Act of 1961.

EPF contributions are often provided by the employer in addition to employee deductions that are typically made as a percentage of monthly wages.

Once it reaches maturity, the EPF withdrawal corpus is entirely tax-free. The Indian government also determines the EPF rates each quarter and provides a guarantee on your EPF deposits.

6. National pension system

The National Pension System is a more modern alternative for tax-saving investments (NPS). NPS plan subscribers must stay committed until retirement and can anticipate higher returns than those from PPF or EPF.

This is true since the NPS offers plan choices that include stock investments. A portion of the tax-exempt NPS maturity corpus must be utilized to purchase an annuity that will give the investor a regular pension.

types of child investment plans in India

7. US stocks

By purchasing US stocks, you may gain exposure to the most well-known brands, like Nike, Starbucks, and other well-known companies like Tech Giants Google, and Apple.

These businesses are well-known and present around the world. You may diversify your portfolio by investing in such businesses. Over the previous five years, the US dollar has increased.

You acquire US Dollars when you invest in US stocks. When these assets are kept for a lengthy period, the value of your investment rises about the USD exchange rate.

Investment plans for children help you and your child prepare financially for growing education costs, unanticipated illnesses, and bad circumstances.

Planning for your child’s future must begin as soon as feasible. This spreads out the risks involved and gives your assets more time to flourish

Consult an expert advisor to get the right plan

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