Published on September 9th, 2019
If you are concerned about financing your child’s future it is a good idea to consider a child plan. Children grow up and get married, go off to college or pursue other dreams.
And of course all of these happenings require money. As a parent you are responsible for your children and you want to secure their future whether you are alive to see it unfold or not.
1. Life Insurance Policy
Many parents prefer to take on low risk investments when it comes to securing their children’s futures. And a life insurance policy is a great option. Some policies offer a money back policy that allows for regular pay-outs, while others will mature quite nicely.
Consider a 20-year term policy purchased during pregnancy or soon after your child’s birth. A 30-year term for Rs 20 Lakhs may cost about Rs 5,000 per year.
If you opt for the pay-outs, you can either put it in savings or you can use it to pay your premium. You can take advantage of a money back policy and use it to reinvest it. Fixed deposits are a good option for reinvesting.
Investing in Public Provident Fund (PPF) is a great choice for long-term investments. One of the biggest advantages to choosing PPF is that it is a tax-free investment, so you’re able to keep the whole of the matured amount. Here’s an example.
Investing Rs 100,000 per year for a 15-year period can return to you as Rs 31.30 Lakhs completely tax free. Growth like this can allow your child to get an education in another country if they choose. It just might allow you to pay for a wedding and a college education.
3. Mutual Funds
Although mutual funds are not generally considered to be low risk investments, performing mutual funds in the long run are lower risk than short-term. For instance, if you were to invest Rs 1,000 each month through the Systematic Investment Plan (SIP) at 13%, in 10 years you would have Rs 2.5 Lakhs or Rs 5.5 Lakhs in 15 years. With returns like these, mutual funds are a really good option.
If you’re still concerned about the security of mutual funds through SIP, you may want to give balanced mutual funds or large cap funds a try. These funds don’t fall as much in a sliding market because these companies pay regular dividends and have a more optimal cash flow.
You should also consider diversifying your investments so that you have multiple sources of income. There are plenty of options when it comes to investing in your children’s future. These are just a few suggestions. There are other post office schemes, National Savings Certificates, recurring deposits and more that you can invest in to secure a great start for your kids.
Managing your finances for the future can be a little overwhelming at times, so if you need help, it is a good idea to consult with a financial advisor or planner to help you sort out all of your questions. You can do more than you think when you select smart investment options.