Money talk: What Are The Best Investment Options For Your Child?
As a parent who puts their children first, no one understands the importance of providing them with financial security like you do. To ensure that you rise to the occasion without complicating matters, it’s important that you adopt a systematic approach.
Providing financial security for your children will help you ensure that in a world where costs are always on the rise, your children don’t have to compromise. Medical inflation and cost of education are two major areas that have experienced a sharp increase in recent times. In fact, experts opined that service inflation has been at a higher rate than that of goods, resulting in higher personal care, education and healthcare costs.
So let’s take time out to look into the best investments you can make for your children now so that they are set for success later on in life.
Mutaual funds for higher returns
Mutual funds are becoming a popular investment option despite the risk because they yield high long-term returns. With these automated investments, you can enjoy staggering returns especially when compared to parking funds in a savings account or a fixed deposit.
Choose your mutual fund options according to your children’s short, medium and long-term needs to ensure sufficient finance every step of the way. Make sure to diversify your investment for the best returns and to even out the risk.
Low risk appetite? Go with small savings
It is possible that at the moment your ability to absorb risk isn’t high for a variety of reasons. Fret not for you can still invest wisely for your children’s future by opting for small savings schemes such as Sukanya Samriddhi or even PPF. These may involve recurring deposits that help you develop the habit of regularly setting aside funds for your child until you can invest the amount in a better instrument at a later date. Or, you can choose a fixed deposit that offers you guaranteed returns in combination with child saving schemes. By making smart decisions, such as choosing company fixed deposits over bank fixed deposits for a better rate of interest, you can do the best possible without taking on more risk than you can afford to.
Always have a term insurance plan
By purchasing term insurance for yourself, you can also create a source of financial protection for your child. In case of your demise, your children will benefit from the sum assured. This will help cater to any education or healthcare costs, without having to cut corners. So by investing in insurance, you can rest assured that your child's future will remain secure no matter what.
Pick child plans with utmost care
While the government has instituted Sukanya Samriddhi, a scheme to save for the girl child, it is possible that you’re looking to supplement this, invest for your son, or simply invest for your daughter who’s now over the cut-off age. Picking a child plan is the obvious alternative but the thing to keep in mind is that you must choose one very carefully.
For instance, you can pick child plans that cater to specific needs. Needless to say, look into the rate of return and determine if it will match up to the rate of inflation and your child's growing needs as the years progress. Also consider perks such a premium waiver benefit or partial withdrawals before deciding. Further, opt for a unit linked child plan if you have a moderate risk appetite or an endowment child plan if you want to play it safe.
If you feel that your children are growing up too quickly, you have all the more reason to roll up your sleeves and get started on investing for your children right away. Through the steps you take today you'll be able to ensure their well-being for years to come.
The writer is CEO, BankBazaar.com
