Planning for your child’s future is no simple matter, and often, you realize that the amount is insufficient to meet their requirements. So, you need to invest in suitable financial products at the right time to avoid this situation.
Here are some investment options for your child’s future:
- Mutual funds
You can invest in debt, equity, or balanced funds based on your financial goals. Investing in equity funds via a Systematic Investment Plan (SIP) can yield high returns over the long term. Debt funds are less risky and more liquid. You can utilize the returns earned from these funds to meet recurring expenses, such as your child’s school or college fees.
- Equities
Stock markets have historically delivered good returns in the long run. However, equity markets are volatile and riskier. It is advisable to seek expert guidance before investing in equities.
- Real estate
Investing in property has also been popular in India, as capital growth is high over a long duration. However, real estate requires a huge investible surplus and may not be an ideal alternative.
- Term plans
Insurance is important to ensure your child’s financial stability in case of your sudden absence. A term insurance plan is the most affordable form of life insurance policy. It pays the benefits to your nominees if an unforeseen event occurs during the policy duration.
- Deposits
Fixed deposits (FDs) and recurring deposits (RDs) can be beneficial to secure your child’s future. RDs allow you to invest small amounts at regular intervals to build a corpus over the years. Alternatively, you can open an FD if you want to invest a lump sum for a fixed duration. Financial institutions pre-determine the FD rates based on the investment period. Additionally, FDs provide assured returns, eliminating market-related risks. Several financial institutions offer specific FDs for children. FDs are advantageous because of guaranteed returns; however, these earnings are taxable. Therefore, consider your income tax bracket to ensure that you do not end up paying high taxes on the FD returns.
Follow these five steps to plan for your child’s education:
- Determine the total expenses and do not forget to add the annual increase due to inflation
- Calculate the required corpus and the investment tenure
- Create a diversified investment portfolio by estimating the returns
- Arrive at the amount you will need to invest each month to reach your desired target
Leading financial institutions like Mahindra Finance offer competitive fixed deposit interest rates. You can complete the procedure online. Visit the issuer’s website to know more about the interest rates, durations, and documents required. You can also learn about the fixed deposit eligibility over there.
