Parenting is a constant effort to improve your child’s future in all ways possible. Their education is of primary concern. You want to provide your child with the best education possible, despite the steep rise in education costs. It is inflation that is to be blamed for this, but a child education plan is the best way to combat it.
Investing for a longer period yields the best results since compounding works in your favor. The investment opportunities available to your child are numerous. Here are some of them:
Sukanya Samridhi Yojana (SSY)
This scheme is initiated by the government for girl child below the age of 10 years old. This allows you to open two accounts for two daughters. It is quite easy to open an account for this, you can go to a bank or a post office. To open a Sukanya Samridhi Yojana account, you must deposit 250 rupees. A maximum of Rs. 1.5 lakh can be deposited each year.
For the first 15 years after opening an SSY account, you must continue to deposit.
For instance, if your daughter is six years old, the scheme will mature when she is 27. A partial withdrawal is permitted after 18 years of age, and that too for marriage-related reasons.
A mutual fund is considered to be an excellent investment strategy for leaving you with a high corpus. A long-term financial investment such as this diversified equity can be ruled by mutual funds. Risk comes with equity investment, but so do high returns. To minimize risk, diversify your investments. Investing for a long period is primarily a way to gain the reward of compounding interest.
A mutual fund can be invested in two ways: through a SIP or by lump sum. The most popular investment method is SIP (Systematic Investment Plan). SIPs are disciplined investments that deduct a set amount each month from your account for investment, helping you reach your goal.
Unit Linked Insurance Plans (ULIPs)
ULIPs are the best choice for ensuring financial security and creating wealth. A ULIP or Unit Linked Insurance Plan offers both investment and insurance services. As with any normal insurance policy, ULIPs also require regular premiums, the only difference being that they are linked to the market.
Your child’s education & marriage costs can be covered swiftly with ULIPs! In addition, if the policyholder dies, the child will receive a lump sum or regular payments, according to the policy.
Tax-free returns are available after maturity. The government, however, has limited the investment of such a strategy to less than 250,000 premiums per year. It is important to note that ULIPs require a minimum commitment of 5 years. This makes them a good investment for long-term goals.
Public Provident Funds (PPF)
A popular government-funded scheme introduced by the Ministry of Finance in 1968, Public Provident Funds have been around for quite some time. In terms of long-term investment horizon, PPF received a lot of attention from investors. In order to get the best returns on your investment, it is recommended that you stay invested for at least 15 years.
You may also consider opening a PPF account under your child’s name for their needs. PPF accounts allow you to create a tax-free fund for your child for 15 years. A partial withdrawal can be made after the 6th or 7th year if your child needs financial assistance. As soon as your child becomes an adult, they can contribute to and extend the PPF account.
PPFs currently have an interest rate of 7.1% per annum, compounded annually. PPF account holders receive interest every 31st of March. You can claim up to 1.50 lakh under Section 80C every year as a tax benefit with PPF.
- Gold ETF
The addition of this investment can also be made towards your child’s education goal. The non-depreciating value of gold makes it a valuable asset. Each gold ETF unit represents one gram of gold, which makes them mutual fund units. Alternatively, Gold ETFs are also known as paper gold.
Due to their digital availability, gold ETFs are safer and do not require additional storage and security costs. Through the stock exchange, gold ETFs can be bought and sold easily.
It is a rollercoaster ride to become a parent, from educating your child to giving them the marriage of their dreams. The planning process does not end with the birth of a child, it continues throughout the child’s life. Be financially prepared to support their dreams & aspirations, their dreams are now your dreams.
If you have any questions please do not hesitate to contact us anytime.