Invest for your child’s future – Raising a kid today is no easy feat. You manage a job, ensure your child is learning his curriculum, doing sports, and managing their mental health while also somehow ensuring that they develop into well-rounded human being. While you are ensuring that you give them the best of everything- you also set some money aside for their future, and hope that it is enough.
But the costs of education and living expenses are spiralling. Rising EMIs are burning a hole in your pockets, and you are essentially losing the money in your savings account to inflation. So how do we ensure the money we save for our children is actually a substantial corpus to help them build a good future?
Investment in Mutual Funds via SIP
Yes, mutual funds are subject to market risks, but investing is still one of the best ways for a parent to grow a substantial corpus for their kids. It has been seen that investing systematically over a long period of time, does not just average out the market fluctuations, but also helps investors benefit from the power of compounding.
Compounding is a simple yet powerful concept. The amount you earned is reinvested into the same fund, so essentially you are earning more on your earnings.
Check out the below example:
Your child will be the only holder of that fund, and you will have to be marked as the guardian. The only thing you need to ensure is that when your child attains majority (or 18 years) you remember to do their ReKYC, so the investments do not stop. And what’s more, it is not necessary that you hold the child’s investment in the physical form, you can start the SIP from your minor’s Demat account.
Contact here for details for the Demat account for minors
Start a SIP, call 0731-4217119 today!
Investment in stocks
Investing in the stock markets can help your capital grow over the long term. You can choose from a wide range of quality bluechip stocks or invest in emerging sectors like EVs, renewable energy, IoT etc. If you have the knowledge, patience or foresight, you can build your own diversified portfolio for your child and check its progress periodically. To start investing in stocks for your child, you can open a Demat account in your child’s name and make investments from that account as a guardian.
Please note that a minor account cannot be used for intraday trading in both cash or in derivative or currency segments.
Did you know that you can manage multiple accounts easily from the all-new Arihant Plus app? Check out the video here and download the app now.
Investment in Gold
Traditionally, many people choose to invest in gold. Gold is considered a safe haven, and its price has mainly gone up over the long term. Yes, it is true that gold may not give a huge appreciation when compared to equity investments. But historically, Indians have used this avenue to plan for their child’s marriages. Since this is an asset that they plan to hold for a long time, many people choose to invest in gold early on, and hedge against a future price rise.
The only problem- gold is bulky, and storing it has its own challenges. But nowadays you can invest in gold with a guarantee of purity and without the hassle of its physical storage with sovereign gold bonds and digital gold.
Sovereign Gold Bonds
Sovereign Gold Bonds are the Government of India’s securities denominated in grams of gold issued by the Reserve Bank of India. Buying an SGB simply means you are buying gold in paper or electronic (Demat) form instead of physical gold.
And the “Sone Pe Suhaga” (quite literally) is that you earn interest of 2.50% p.a. in addition to the appreciation of the market price of gold.
SGBs are available in both the Demat and the physical forms. No TDS is applicable on interest, and one can avail of indexation benefits if the bond is transferred before maturity. There are no capital gains on SGB redemptions if redeemed after maturity. The only catch is that one can invest in SGBs only for the duration that a subscription is open.
Gold and Siver ETFs
If you want to invest in pure gold but need high liquidity, another alternative is using Gold and Silver Exchange Traded Funds. Once again, you will need a minor’s account to invest in these mutual funds and you can be a guardian till the child attains majority. Since ETFs are traded on exchanges, you can withdraw money from them at any time.
Investment in FDs, PPFs
Risk-free savings avenues such as fixed deposits, PPFs, etc., are also sought after by new parents who are averse to fluctuations in the market performance. They offer a fixed return on your investment. There are tax exemptions on PPF interests and on redemption of principal. Bank FDs also help in tax exemptions up to 1.5 Lakh under section 80C.
Sukanya Samriddhi Yojna for girl child
This scheme under the government’s aid, helps parents of girls invest in their future. An account can be opened for girls under the age of 10 through a bank or a post office. The scheme yields a high-interest rate and also gives tax benefits on investments. In 2022, the scheme yields 7.6% interest annually. The account matures after 21 years of opening but also allows up to 50% premature withdrawal for her education.
Child Insurance Plan
One of the most preferred tools to invest in a child’s education is using a child insurance plan. A child plan is a mix of investment and insurance that helps in the financial planning for a kid’s future needs. It gives peace of mind to parents by securing a child’s financial future even if they don’t survive. It includes life cover as a lump sum and flexible payouts at important milestones in a child’s life. It is less risky than investing in mutual funds as you can choose from a fixed payout as well as from a market-linked plan. It also qualifies for tax benefits.
In investments the best time to start investing is today. So whichever product you choose to use for your child’s financial future. Start now!