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In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/492
Planning for the child’s financial security is an extremely important yet daunting task. With the numerous options available, you must choose the best investment plan that can offer a financial safety net to your child.
Given the rate at which inflation is noting an upward trend, your child’s future, and financial security need to have a dedicated investment made in their name. There are numerous savings options available out there, but you must look for the best child investment plan as per your financial goals and futuristic plans for your child. Child investment plans come with added benefits and have additional support from the government and insurers.
This article will discuss the best investment plan for children that you can consider investing in. Let us take a brief look at the best investment plan for the girl child in India.
A child investment plan in India is a long-term savings plan designed to help parents and guardians save for a child’s future.
In case of the insured’s death, the company will provide the child with annual payments of a portion of the policy’s maturity amount until maturity, and any remaining payments not already made are waived. Upon maturity, the entire cover amount will be given to the child. If the insured survives the entire policy period, the full cover amount will be paid out to the child. Additionally, the insured (parents) are able to access the funds accumulated in the policy for any mid-term needs.
If you wonder how to make this investment plan work, below-listed are some of the steps for you to explore:
Parents or legal guardians can set up a children’s investment plan by opening an account with a financial institution, such as a bank, brokerage firm, or investment company. The account is established in the child’s name but managed by the adult until the child becomes eligible to take control of the account.
The account holder can make regular contributions to the plan, which can be weekly, monthly, or annually. These contributions can be in the form of cash deposits, direct debits, or electronic transfers. The frequency and amount of contributions depend on the account holder’s financial capacity and goals.
Children’s investment plans offer a range of investment options, such as mutual funds, stocks, bonds, or index funds. The account holder can choose investments based on their risk tolerance and long-term financial goals. It is essential to consider the investment horizon and the child’s age when selecting the appropriate investment strategy.
Over time, the investments in the children’s investment plan can generate returns in the form of capital appreciation, dividends, or interest. The compounding effect allows the investment to grow substantially over the long term, providing a solid financial foundation for the child.
Children’s investment plans may have tax advantages, such as tax-free growth or reduced tax liability. The specific tax treatment depends on the jurisdiction and the type of account chosen. It is advisable to consult a tax professional or financial advisor to understand the tax implications and benefits.
Investing in a safe and secure future for your children is one of the most important investments you will ever make. Whether you are saving for college or the retirement of your child, investing for their future should be part of your overall financial plan.
But with so many investment options available, it can be overwhelming to decide which one is right for your family. So, keep scrolling through to know the considerations while selecting the best investment plan for child.
Before making an investment, you must identify your investment goals and perform a cost-benefit analysis.
Before making an investment decision, you must understand the different types of investment plans available in the market and make a diverse investment portfolio.
Invest in a plan that offers enough corpus to meet expenses like education, health emergencies, and miscellaneous costs.
Consult with an expert to identify the maximum contribution you can make to an approved plan without facing tax charges; investigate what local or state benefits could bring you further gain.
The financial market, specifically in the case of insurance and investment policies, is highly saturated, and you will get a long list of options to pick from. This vivid availability makes it very difficult for the parent to choose the correct and best child investment plan. To ease this daunting task, here is a list of child investment plans in India that might cater the best to your child’s needs:
Unit Linked Insurance Plan is the best investment plan for a child, as this plan yields higher returns. ULIPs are financial plans that offer both the security of insurance and the opportunity for investment in the markets. In addition to this, they offer triple benefits as a child investment plan.
In case of the parent’s demise before policy maturity, the insurance company will pay further premiums for the policy. The child will receive a monthly income/allowance to meet the daily or educational expenses.
SIPs are mutual fund schemes that serve as the best investment plan for a child’s future. In SIPs, the bank invests the amounts in market funds like debts, equities, or hybrid funds, which allows them to grow the income to a large extent. SIPs are a great choice for parents as the best investment plan for children as they ensure a better return on investment. However, SIPs are market-linked financial products that are influenced by market fluctuations and performance.
SSY, or Sukanya Samriddhi Yojana, is a savings scheme available for girl children in India. Being a government scheme, it is highly reliable and preferred by many as the best investment plan for the girl child in India. As a parent, you can open this scheme in the name of your daughter in the bank and yield a good interest rate of approximately 7% to 8%, subject to changes. The account will mature once the girl turns 21 years old. The minimum investment amount for this scheme is ₹1000/- and the maximum is ₹1.5 lacs.
Parents prefer this option as the best investment plan for their child’s future because some of the debt mutual funds offer better returns than simple bank deposits. Additionally, they are more tax-efficient, making them a much better choice. You can opt for debt funds if you are looking for a long-term investment goal to support your child’s future.
In the list of best child investment plans in India, PPF is a key player in a long-term investment that is highly secure. In PPF, funds are locked in for 15 years, and you can invest a minimum of ₹500 to ₹1.5 lakhs per annum. PPF, on average, generates returns at a rate of interest ranging from 8% or above. You can open PPF accounts at banks and post offices.
When the markets are erratic and against equity, gold always serves as the ideal hedge. Gold is a reliable kind of investment, especially over a long period of time, and it fights the forces of inflation. Additionally, it has a high degree of liquidity and can be usefully cashed in for a child’s future financial needs.
To lessen the risk involved with gold storage in physical form, experts advise against investing in it.
Deposits made to equity mutual funds rank high in the Children’s Investment Plan. The two main justifications for the same are the availability of investment options and the longer time horizon of 10-15 years. Equity funds have historically produced annual returns of between 12% and 15%.
Recurring Deposits are a good option for parents seeking a low-risk investment strategy for the future of their children because interest rates at all times remain high. You can create future plans for your child by locking the RD. Both banks and post offices provide recurring deposits in India.
For instance, after ten years, a monthly investment of ₹1000 can yield ₹2 Lakhs. On the official website of the Indian Post Office, there is a tool you can use to check the potential returns on your monthly investment. As a child saving plan, this is a good way to collect a corpus without the risk involved
Child investment plans in India offer two main benefits: saving money for a child’s future and creating a financial cushion to help them meet unexpected expenses. Apart from these, there are a plethora of other benefits as well that this investment policy offers. Let’s dive deeper to know the details:
The rising inflation is leading to increased education expenses. With this, arranging funds to meet the expenses of higher education can be quite difficult. A child plan, if taken during an early phase, can help you easily accumulate enough finance to offer the best education to your child.
Child plans taken at the right time can be a saving grace in the case of illnesses or medical emergencies that requires expensive treatments. Not only do child plans allow for savings to be accumulated, but they also provide additional returns. These returns can be used to support the child in terms of providing for their healthcare needs, alleviating any financial burden.
Many investment plans for children offer tax benefits, such as deducting contributions from taxable income. This can help to reduce your family’s overall tax burden.
In the event of a parent’s death, surviving children will receive the maturity amount upon completion of the policy term. Additionally, they will receive annual payments throughout the duration of the policy from the year of passing and no longer need to pay premiums.
Every parent wants to provide the best they can for their children, and it is essential to plan for their future financial needs as early as possible. The simplest and most effective way to do this is to start saving now. Even small amounts saved up regularly can provide a large amount of money for your children and dependent family members over time, thanks to the power of compounding.
Early saving also gives you more time to invest in those options that yield high returns in the long run. It is never too late to start saving for your children’s future, and beginning as early as their formative years will help you amass enough money to fund their needs as they grow older. So, be sure to lay out your savings plan today and reap the manifold benefits of starting to save early.
The best investment plan for children is one that not only yields a good return but also provides security for their future. Utilizing the services of a financial planner to create a solid, comprehensive investment plan may provide the greatest security and return for the future of one’s children. It is important to recognize that no single investment plan guarantees success, but by investing wisely and with proper advice, parents can secure their child’s future and give them the opportunity to reach their goals.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
In this policy, the investment risk in the investment portfolio is borne by the policyholder.
Kotak e-Invest
Features
Ref. No. KLI/22-23/E-BB/521
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
