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Securing your child’s education future with child investment plans

Oct 30, 2019 | 9 months ago | Read Time: 3 minutes | By iKnowledge Team
Securing Your Child’s Education Future with Child Investment Plans

Education in India is as excellent as it is costly. Inflation in education costs are constantly rising as much as 8-12% by the year. Admission into IIT (B. Tech) cost INR 4.5 Lakh, back in 2008, and today, it costs INR 10 Lakh, which will only double five years down the line. Given the statistics, not having a sound child investment plan could cost you your child’s education.

There are three primary things that a parent wishes for their child financially. A good education, decent social exposure, and a comfortable lifestyle. While short-term expenses will continue as they are, education overweighs the other two. To secure your child’s bright future, financial planning is an absolute must. We would like to discuss some pointers that you may want to consider in your child plans.

Understanding Child Investment Plans

Saving for your child’s future in today’s date simply won’t cut it. Your child investment plans must compile a portfolio comprised of both savings and investments, to multiply your corpus and maintain it against inflation.

Here are some ways through which you can save for your child.

Sukanya Samriddhi Scheme

The Sukanya Samriddhi scheme was launched by the Government of India for the sole purpose of promoting the need to educate the girl child. This means that if you have a daughter, this is the scheme for you, to invest and include in your child plans. You can apply for the scheme at any time from the birth of your daughter, till she turns 10.

The minimum amount to be invested can be Rs.1000 and maximum is Rs.1.5 Lakh per year. The maturity period will be 21 years from the date of opening the account, and deposits can be made for a period of 14 years.

What is more attractive is the 8.1% interest rate per annum since this year and is subject to change as per governance. This scheme enjoys a tax exemption under section 80C. What’s more, partial withdrawals are allowed after the child turns 18 years of age.

Investment in Gold

As per Macquarie’s, a global research firm, Indian housewives own 11% of the world’s global gold stock. This goes to say that Indians love to invest in gold as it acts as a security against losses in the equity market.

Storing physical investments in gold can prove risky, hence, investment in gold can be done through gold mutual funds or E Gold. You may invest as much as 10-12% as security from your planned corpus.

Equity Mutual Funds

Equity mutual funds have a proven track record of delivering sizeable returns that compound over time. The key to equity mutual funds is time and monitoring. These financial instruments make up most of your initial to mid-goal portfolio, after which you slowly switch to debt instruments to protect the returns you make on equity.

As Equity funds generate 12 to 15 percent returns per annum, it is one of the best ways to invest for your child. But it is wise to keep in mind that there is considerable market risk involved.

Term Insurance Cover

A proper Term Insurance cover will help secure your child’s future against the unfortunate. Your child insurance plan must take three things into consideration – Education, Marriage and Living Expenses to figure out how much to insure them for. For an accurate assessment you may use the premium calculator available online.

PPF

A Public Provident Fund is tax exempt and flexible, since the investment made can amount from Rs.500 to Rs.1.5 lakhs per year. The account can be opened in the child’s name and in the parent’s name to double the investment limit. They come with a 15-year maturity period.

Short Term Funds

Short term requirements like school supplies, medical expenses, school trips and your child’s pocket money can be taken care of by investing in recurring instruments like bonds and fixed deposits. These accounts are risk averse with returns at 6-8%. Teach your child the value of saving by letting them manage the money themselves, for it is one of the greatest skill sets that they will learn in life.

ULIPs

Unit linked insurance plans are a smart way to secure your child’s future and insure them against unforeseen events, while also making returns from stock market investments. ULIPs are hybrid insurance instruments that allow a portion of your premiums to be invested into the market to generate returns that are also tax exempt under Section 80C.

Battling out inflation for a secure future for your child is easy, if only you plan right. Your portfolio must be balanced between both investments and insurance to ensure that your child receives everything they need to achieve their goals in life, starting with education. You can make sure that it happens despite your absence.

To know about Aegon Life’s life insurance products like health insurance and other products, visit our home page.


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