Who does not want one’s kids to become as rich and successful as the Tatas and the Ambanis, after they grow up? However, if wishes were horses, everyone would have become a rider! The fact is, while securing the future of one’s child and making them a highly successful person is every parent’s dream, it is not an easy thing to do, particularly in view of the skyrocketing costs of education and many other such things. In fact, education itself has become so costly today that very few parents are able to afford the entire cost of their child’s education, particularly higher education, all by themselves.
Therefore, if you want to secure the future of your kids and accumulate wealth for their education and marriage, then you need to invest wisely and regularly in some good investment avenues, keeping these goals in mind. Although there is still no best way to save money for one’s child, here we are taking a look at some of good options:
1. Sukanya Samriddhi Yojana: It is a Government of India initiative to encourage saving for girl child. It can be opened from the time of birth till your daughter attains 10 years of age. A minimum of Rs 1,000 and a maximum of Rs 1.5 lakh can be invested every year. Deposits can be made for 14 years and the maturity period of the account would be 21 years from the date of opening the account. The current interest rate is an attractive 8.3 per cent per annum, which is subject to change. “Like PPF, it is an EEE product and tax exemptions can be claimed under Section 80C. Partial withdrawals are also allowed after the child attains 18 years of age. EEE stands for exempt, exempt, exempt which implies tax exemptions upon investment, interest received and maturity,” says Brijesh Parnami, ED and CEO of Essel Finance Wealth Zone Pvt Ltd.
2. Gold (Long Term): Gold acts as a hedge against equity and during volatile times. Gold ensures your risks in the financial markets are hedged. One should invest in gold either through ETF, gold mutual funds or E-Gold. “It is advisable to avoid physical investments in gold in order to reduce the risk of storage and the cost associated with the physical holding. Also, prices of the paper gold are derived based on the current gold prices in the market and hence it is similar to buying or investing in a gold fund. However, make sure this investment does not exceed 10-15 per cent of your overall portfolio or only as much as you would need for the goal,” suggests Parnami.
3. Risk Cover to Protect Future Goals: You should also take proper term insurance cover for yourself to secure your child against any unforeseen event. Though these things do happen, but the probability or chances of happening such events would be low or cannot be quantified. Three important expenses to be taken into consideration while going for a cover are: 1) Education, 2) Marriage, and 3) living expenses till they become adult.
4. Equity Mutual Funds: Equity funds have a history of generating 12-15 per cent per annum returns. And SIP, of course, is considered to be one of the best ways to average your cost over the long term. There are a couple of mutual fund companies which have got a fund as Children’s gift fund. Both these funds are balanced category fund (mix of debt and equity) with a special a lock-in period, i.e. once the child turns major (he/she becomes 18 years of age), then only he/she can redeem the investment.
5. PPF: It is one of the most favourite investment options of a lot of financial experts. The primary reason for recommending this is the impeccable EEE feature. Moreover, the tenure or maturity period of this product, i.e. 15 years, is very apt in terms of investment for child’s education or marriage. “Another feature of this product is the flexibility in terms of investment. You can invest as low as Rs 500 every year and also as and when you want. However, there is an investment upper limit of Rs 1.5 lakh for this account. Account(s) can also be opened in the name of your child and it is possible to invest in oneself through one’s own account, which will double the investment limit,” informs Parnami.
Apart from the above, we should also teach our children the concepts of money and encourage them to save money for his own goals. This will help them realise the value of money.