Child Investment Plans in India: An Overview of Best Plans

Team AckoAug 23, 2024

When it comes to securing the future of your children, financial planning plays a crucial role.

As parents, people strive to provide the best opportunities and financial stability for their children. One of the most effective ways to achieve this is by investing in Child Investment Plans.

In India, there are several options available that cater specifically to the needs of children.

In this article, we will explore the best Child Investment Plans in India, their benefits, and how they can help you secure your child's future.

Contents

• Best Child Investment Plans in India
  • 1. Unit Linked Insurance Plans (ULIPs)
  • 2. Sukanya Samriddhi Yojana (SSY)
  • 3. Public Provident Fund (PPF)
  • 4. Mutual Funds
  • 5. Other options
• When is the right time to start saving for your children?
• What are the key milestones you need to plan for?
• Frequently Asked Questions (FAQs)

Best Child Investment Plans in India

Investing in the future of your child is a significant responsibility. Therefore, it is essential to make informed decisions when selecting the best Child Investment Plan in India. Here are some of the top options.

1. Unit Linked Insurance Plans (ULIPs)

ULIPs are popular investment-cum-insurance plans that offer dual benefits. These plans provide life cover and enable you to invest in different funds. ULIPs also provide tax benefits. 

2. Sukanya Samriddhi Yojana (SSY)

The Sukanya Samriddhi Yojana (SSY) is a specialised investment plan exclusively designed for the financial well-being of girl children in India. Launched by the Government of India, this scheme offers a secure and long-term investment avenue for parents to save for their daughter's future.

Parents can open an SSY account for their girl child either at the time of her birth or before she reaches ten years of age. It can be opened at any post office or authorised commercial bank across the country, making it easily accessible for parents.

The scheme’s tenure is twenty one years or until the girl child’s wedding, whichever is earlier. Once the girl child attains eighteen years of age, she becomes eligible to operate the account independently, empowering her with financial autonomy and decision-making.

One of the attractive features of the SSY scheme is the interest rate, which is declared by the government on a quarterly basis. The interest is calculated on a compounded basis, ensuring that the investments grow steadily over time. This makes SSY a compelling investment option for parents seeking stable returns for their daughter's future.

By participating in the Sukanya Samriddhi Yojana, parents can secure a financial foundation for their girl child, enabling her to pursue higher education, career aspirations, or other life goals with confidence and support. 

3. Public Provident Fund (PPF)

This offers stable returns and tax benefits. It is a popular choice among individuals looking for safe investment options. PPF accounts have a lock-in period of fifteen years, and the interest earned is tax-free. Parents can open a PPF account for their child and contribute to it regularly, ensuring a significant corpus for their future needs.

Check out: PPF Calculator

4. Mutual Funds

They offer various options such as equity funds, debt funds, and hybrid funds. Investing in mutual funds can provide higher returns over the long term, making them an ideal choice for Child Investment Plans. However, it is essential to consider the risk profile and investment horizon before investing in mutual funds.

5. Other options

Along with the four options mentioned above, you can also consider the following when it comes to investing for your child’s future.

• Long term fixed deposit

• Recurring deposit

• Gold

When is the right time to start saving for your children?

Here are some key considerations to help you determine the right time to start.

• Early start: The power of compounding works in your favour when you have a longer investment horizon. By starting early, you give your investments more time to grow, potentially resulting in a larger corpus.

• Birth or early childhood: Many parents choose to start saving for their children soon after their birth or during their early childhood. This allows for a longer investment horizon and helps in building a substantial corpus by the time your child reaches adulthood.

• Stable financial situation: It is important to assess your own financial stability before committing to saving for your children. Ensure that you have a solid emergency fund, are managing your own finances well, and can comfortably allocate a portion of your income towards your children's savings.

• Goal-based savings: Identify specific goals for your children, such as funding their education, supporting their career aspirations, etc. Once you have clarity on these goals, you can create a savings plan and start investing accordingly.

• Education planning: Education is a significant expense, and it is wise to start saving for your child's education well in advance. Research the expected costs of higher education and factor in inflation to determine the amount you need to save each month.

What are the key milestones you need to plan for?

When it comes to saving for your children's future, it is important to identify key milestones and plan your finances accordingly. By understanding and preparing for these milestones, you can ensure that you have the necessary funds when the time comes. Here are some key milestones to consider.

• Education expenses: One of the most significant milestones is funding your child's education. From primary school to higher education, the cost of education continues to rise. Start saving early to accumulate the necessary funds.

• Skill development and extracurricular activities: As your child grows, they may develop interests in various extracurricular activities or pursue skill development courses. These activities can contribute to their overall growth and help them excel in their chosen fields. Plan for the associated expenses, including classes, equipment, and coaching fees.

• College and university: Another crucial milestone is funding your child's college or university education. This may include tuition fees, accommodation, transportation, and other living expenses. Determine the potential costs and start saving early to ensure you can provide the necessary financial support.

• Career development: As your child enters adulthood, they may require financial assistance for career-related expenses. This could include costs associated with internships, professional courses, certifications, or setting up a business. Prepare for these expenses by setting aside funds or exploring investment options that can support your child's career development.

• Wedding: Wedding is a significant event in many cultures and often involves substantial expenses. While it may seem far off, planning for your child's wedding can help alleviate financial stress when the time comes. Consider the costs of ceremonies, venues, outfits, and other related expenses. 

• Emergency fund: Alongside planning for specific milestones, it is crucial to have an emergency fund. Unforeseen circumstances such as medical emergencies, job loss, or other financial setbacks can arise. Having a contingency fund will help you navigate such situations without compromising your child's future goals.

Frequently Asked Questions (FAQs)

Here are some FAQs about Child Investment Plans

What are the key factors to consider when choosing a Child Investment Plan?

When selecting a Child Investment Plan, it is crucial to consider factors such as the investment horizon, risk tolerance, returns, tax benefits, and flexibility. Additionally, it is essential to evaluate the reputation and track record of the insurance company or fund house offering the plan.

Can I change the investment strategy in a Child Investment Plan?

Yes, many Child Investment Plans offer flexibility in terms of investment strategy. 

Can I withdraw funds from a Child Investment Plan before maturity?

Child Investment Plans usually come with a lock-in period, during which premature withdrawals are not allowed. However, some plans offer partial withdrawal options in case of emergencies. It is essential to understand the terms and conditions of the plan before making any withdrawals.

How much should I invest in a Child Investment Plan?

The investment amount in a Child Investment Plan depends on various factors such as your financial goals, risk appetite, and investment horizon. 

Can I avail of a loan against a Child Investment Plan?

Some Child Investment Plans might offer the option to avail loans against the policy's surrender value.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.

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