Children’s Day is not only a time to celebrate the childhood but also an opportune moment for parents to reflect on the future and make strategic financial plans for their children. Now when the cost of education is rising, it becomes highly necessary to make the right financial decision for your children.

It is essential to begin your financial planning journey by establishing clear and realistic financial goals for your children. Identify key milestones such as their education, marriage, and any other significant life events. Understanding the financial requirements for each goal will provide a roadmap for your investment strategy.

Starting Early

Time is a valuable asset when it comes to investments. The earlier you start, the more you can leverage the power of compounding. Children’s Day serves as a poignant reminder to begin the journey of financial planning for your little ones, giving their investments more time to grow and accumulate wealth.

Understanding Risk Tolerance

Every financial plan involves an element of risk, and understanding your risk tolerance is crucial. Evaluate your comfort level with different investment options, considering factors like volatility, market fluctuations, and your financial objectives. This awareness will guide you in selecting the most suitable investment avenues.

Also Read: Why is it important to educate your children about money?

Exploring Investment Options

You have a diverse range of investment options to cater to various financial goals. Consider incorporating a mix of equity and debt instruments into your portfolio. Equity mutual funds, with their potential for higher returns, can be suitable for long-term goals like education, while fixed deposits and recurring deposits provide stability and safety for short-term goals.

Opting for Child-Specific Investment Plans

Several financial instruments in India are designed specifically for children, offering unique advantages such as lower lock-in periods and tax benefits under Section 80C of the Income Tax Act. Explore child-specific investment plans, such as the Sukanya Samriddhi Yojana for girls, or child insurance policies, to align with your financial goals.

Incorporating Education Loans

While saving and investing are essential components of financial planning, it’s also prudent to consider education loans as part of the strategy. Evaluate the available options for educational loans and understand the terms and conditions. This can be especially relevant for higher education within India and abroad, where costs can be substantial.

Teaching Financial Literacy

Children’s Day is an excellent occasion to introduce financial literacy to your children. Involve them in age-appropriate discussions about saving, budgeting, and investing. Fostering a sense of financial responsibility early on will empower them to make informed decisions in the future.

Financial Gifts

On Children’s Day, consider incorporating financial gifts as a meaningful way to celebrate milestones in your children’s lives. Contributing to their investment portfolio or opening a savings account in their name not only reinforces the importance of financial planning but also creates a lasting financial legacy.

Adhil Shetty, CEO, Bankbazaar.com, says, “There are many investment options. Equity-linked mutual funds offer an attractive option, offering the potential for higher returns over the long term, making them suitable for goals like education, marriage etc. Additionally, the Sukanya Samriddhi Yojana, a government-backed savings scheme, specifically benefits the girl child, providing tax benefits and competitive interest rates. Fixed deposits (FDs) are a stable and secure choice, offering assured returns, while recurring deposits (RDs) allow for systematic savings. The Public Provident Fund (PPF) is a tax-efficient long-term savings option with a lock-in period, ideal for creating a substantial corpus for various needs. You can compare and adjust your investments based on your different needs, including your children’s education, marriage etc.”

Children’s Day is a perfect time for parents to reflect on their children’s future and take concrete steps towards financial planning. Hope these tips will help you invest for your children and their financial requirements.