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Securing your child's future - 3 options to try

We list the 3 primary investment options to try for your child’s future, based on stage of life and your goals.

If you were to count your blessings, your children would certainly top the list. Everything you do, every extra hour of work you put in at the office, is aimed at providing a life of security and happiness for your child.

And with good reason – the costs of higher education in India have risen exponentially over the last decade. By the time your child becomes 18 years old and wishes to enrol for a certain course or attend foreign university, the costs of education will have tripled the current costs. Are you equipped to pay to make your child’s dreams come true? You can be, by following the simple investment options we outline below:

1 For your child aged less than 5 years: Savings account deposits

The most basic step in creating wealth for your child, starts with opening a savings bank account in their name. As the primary executor of the account, you can deposit regular savings in your child’s name every month, apart from any incremental earnings (annual bonus, gifts from relatives, income from part time work, etc.) The bank account pays savings deposit interest, so the more you save in your child’s bank account, the more money it will earn. Over a long period of time, this fund accrues to a large sum of money that you can reinvest in another instrument to gain more returns (See point #3 for an idea of what to do with a large savings fund)

2 For your child aged between 5 years to 18 years: Special Situation mutual funds

The reclassified fund universe has made it simpler for parents to pick and choose the right mutual funds that will create a healthy corpus for their child’s future. An excellent investment option to try is the Special Situation Mutual Fund. This mutual fund generates a large corpus of money over a longer period of time. It is ideal for parents who want a window of 10 years or more to create a corpus for their child’s use. The Special Situation fund invests in debt and money market instruments, while also ensuring high growth by investing in equity and equity-related instruments. You can open and operate the mutual fund in your child’s name, and use the money for various objectives, from education to child’s wedding.

3 For your child aged between 15 years to 18 years: Recurring deposit or FD

Since your child is already 15 years old and likely to decide on a higher education objective quite soon, you have a lower window of opportunity to invest money in a suitable instrument. We recommend using a large savings fund and starting a debt-based investment option like a fixed or recurring deposit. You can invest in a tax saving 5-year fixed deposit using the money, to gain good returns via the interest paid on the sum. It is also a tax efficient option.

Post Author: Amrina

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