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Long-Term Investment Options for Your Child's Future

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Long-Term Investment Options for Your Child's Future
August 03, 2023

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Every parent always wants to do whatever they can to provide for their child. They seek out the best investment plan for their child to financially secure their future. Along with financial support, parents also provide mental and emotional support to help their little ones achieve all their dreams. Given today’s inflation rates, you need to make prudent choices today to safeguard your child’s future. But, before we take a look at the plans that can help you do that, you need to crunch a few numbers to understand how much money you need to build up for your child’s future.

How Much Should I Save for My Child’s Education?

From the time your child is born, you worry about sending them to the best possible school and college. Sadly, a good education often comes with a high bill. Thankfully, you can use a child investment plan to help you grow your money. But first, think about how much you will need for your child’s education.

Start by looking at the cost of going to a good school and college today. Let’s assume your child would like to become an engineer when they’re older. Currently, the cost of an engineering course works out to INR 5 lakhs. If you consider an educational inflation rate of 6%, the same degree could cost you roughly INR 12 lakhs in 15 years. Once you know how much you’d like at maturity, you can reverse engineer your plan to figure out how much you need to start investing.

What Child Investment Plans Are Currently Available?

  • Sukanya Samriddhi Yojana (SSY)
    If you have a girl child under the age of 10, you can look at the SSY. This government plan allows you to open an account for your daughter in a post office or bank. Every year, you must make deposits into the account. The minimum deposit value is INR 250 per year, and the maximum value is INR 1.5 lakhs. You need to make these regular deposits for at least 15 years and a maximum of 21 years. If you opt for SSY for your 5-year-old daughter and go for the maximum term of 21 years, she will be 26-years-old when the plan matures. Once your daughter turns 18, you can dip into the collected funds to help pay for her further education.
  • Public Provident Fund
    As a salaried individual, you probably already have a PPF in your name. What you might not know is that you can open another account in your child’s name. You can make a maximum deposit of INR 1.5 lakhs per year into the child’s account. The amount you invest in your child’s PPF is also eligible for tax deductions under Section 80C of the Income Tax Act. Over time, the money grows and provides your child with a financial safety net to fall back on in times of trouble.
  • Child Investment Plan with Waiver of Premium
    Another great long-term investment avenue for your little one is a child plan. These policies encourage you to invest money to grow a corpus for your child’s future. They also provide you with life cover. If anything happens to you during the policy term, your child receives an immediate death benefit payout. On top of this, the rest of the premiums get waived. The insurer puts money into the investment for you and continues to build a corpus for your child. When the plan matures, your child will receive the returns of the investment. Most people believe that these policies are the best investment plan for a child.
  • Mutual Funds
    You can use equity mutual funds to invest money for your child. Mutual fund investments come with a lock-in period, so they are ideal when you need to save up for goals that are at least seven years in the future.
  • Gold ETF
    Possibly the only inflation-proof investment for your child is the purchase of gold. Today, you can opt for gold exchange-traded funds, which enables you to purchase paper gold. You do not take physical possession of the precious metal. Instead, you operate an account where the value of money is equal to the actual value of gold. With gold ETF, you can opt to purchase as little as 1 gram of gold whenever you have the funds and build up reserves over time. You can then sell the gold whenever you require money to fulfil your child’s needs.

How Do I Buy the Best Child Plan?

When it comes to investing for your child, there is no right way to do things. Based on your current finances and future goals, you need to decide how and where you’d like to invest for your child.

Purchasing an investment for your child may seem like a lot of pressure. You want to do everything in your power to safeguard their future to the best of your ability. Make sure you take stock of all the options available to you before you pick the best investment plan for your child.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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