Everything, from groceries to education fees, has become increasingly expensive over the years. If you do not make an effort to plan for your expenses, particularly those related to your child, you may find yourself in a financial bind. Most people set aside a portion of their monthly income and deposit it in a bank FD in their children's names. But can a 6% annual return secure your child's future? Maybe not.
 

Here are some of the child investment plans to ensure your dear one has a bright future.
 

What is the apt Investment Plan for the Child?
 

• ULIP policy
  
  ULIP stands for Unit Linked Insurance Plan. It is a type of life insurance policy that provides a double benefit. The first is that it allows you to plan for your short and long-term financial goals by investing in market-linked schemes. And the second is that it provides financial security to your family in the event of an unfortunate event such as death or disability.
  
  We consider the ULIP insurance the apt child investment plan in India because its market-linked component helps to cover your child's college expenses. Whereas; life insurance helps to cover significant expenditures such as weddings when you are not present.
  
  Features of ULIP policy:
  
  
  • This child's future investment plan allows you to allocate funds based on your risk tolerance and future goals. Put your money in a debt scheme if you are saving for any upcoming child-related expenses. If you are planning for expenditures that may arise in the next 5-10 years, go for an equity-oriented scheme.
  • If you possess good financial knowledge and can forecast the market, ULIPs allow you to switch between debt and equity funds.
  • A ULIP has a five-year lock-in period, after which you can make partial withdrawals if an emergency arises.
  • The premium paid for this investment plan for kids is deductible up to ₹1,50,000 under section 80C. Section 10(10D) exempts the payout received at the end of the policy tenure.
     
• SIP
  
  SIPs, or systematic investment plans, aid in the accomplishment of long-term financial goals. You can begin with as little as ₹500. SIP is one of the apt child-saving schemes because of  more returns and compounding benefits. Let's look at an example to comprehend its benefits better.
  
  Assume you started a ₹6,000 monthly SIP in an equity-oriented fund as soon as your child was born. The investment period is 18 years, and the scheme's average annual return is 12%. Given the compounding benefit, you will see a capital appreciation of around ₹45.9 Lakh in this case.
  
  Features of SIP:
  
  
  • SIP investments are pocket-friendly. You can begin with as little as ₹500 without compromising your lifestyle.
  • Even with a small investment of ₹500, you can diversify your portfolio by putting the money in multiple quality stocks.
  • SIP offers flexibility. You can start or stop your investment at any time with a few fingertips without explaining the reason to the brokerage firm.
    
    


• Sukanya Samriddhi Yojana
  
  Sukanya Samriddhi Yojana is one of the apt child plans specifically designed for a girl child. The scheme was launched in 2015 by the honourable Prime Minister of India to assist parents in financing their girl child's education and marriage. As a parent, you may open a maximum of two accounts; however, if you have twins, you may open up to three accounts.
  
  The minimum annual deposit acceptable under this child investment plan is ₹250. Whereas; the maximum annual deposit amount must not exceed ₹1,50,000. 
  
  Features of Sukanya Samriddhi Yojana:
  
  
  • The scheme currently offers an annual interest rate of 7.6% with compounding benefits, but this rate may change from time to time.
  • The deposit made to this scheme qualifies for a tax* deduction under Section 80C.
  • When the scheme beneficiary turns 18, withdrawal of 50% of the account balance is permissible.
  • The account matures when the beneficiary reaches the age of 21 or on her marriage date.
  • Post maturity, the accrued interest is paid to the scheme beneficiary.
     
• PPF
  
  PPF, or Public Provident Fund, is one of the most reliable investment schemes and one of the apt child plans for investment in India. It has government backing and provides you with guaranteed¹ returns. A PPF investment can be started with a minimum of ₹500 and a maximum of ₹1,50,000 per fiscal year. Another thing to keep in mind is that investment is only permissible in multiples of 50.
  
  Features of PPF:
  
  
  • The PPF currently pays an annual interest rate of 7.1%.
  • A PPF account can be kept open for a maximum of 15 years. However, it can be extended for another five years in blocks of five years.
  • The scheme provides a tax* benefit of up to ₹1,50,000 under section 80C.
  • PPF investment allows you to borrow funds against it, assisting you in meeting any significant child-related expense that has arisen unexpectedly.
     
• Debt funds
  
  Debt funds may not provide aggressive returns as equity-oriented schemes, but they are less volatile to market fluctuations and are known to guard your capital. As a result, it is ideal for long-term goals such as a child's higher education. Debt funds include government securities, corporate bonds, money market instruments, sovereign bonds, and inflation-indexed bonds.
  
  When investing in them, keep an eye on the credit agency's rating. Schemes with higher returns may be riskier and have a lower rating than those with lower returns.
  
  Features of debt funds:
  
  
  • Including debt funds in your portfolio provides stability by lowering the risk of capital loss.
  • It provides liquidity benefits and can be easily redeemed in an emergency by selling in the secondary market.
  • As previously stated, this investment option is not market linked and thus immune to fluctuations.

Conclusion

When deciding on an investment strategy, always consider your child's future. The above plans enable you to generate wealth that can be used not only for meeting child-related expenses but also for a secure retirement, purchasing expensive assets, and much more. Furthermore, many insurers now offer customised and extremely good investment plans for children. 

L&C/Advt/2022/Dec/3211