Secure Your Child’s Future with These 4 Investment Plans

“An investment in knowledge pays the best interest.” – Benjamin Franklin

Parenthood is a beautiful experience. You prepare for your child’s arrival into this world, and suddenly it becomes the only thing you care about the most. The little fingers make you realise the responsibility you will now have. Saving for your child’s future and finding out the best investment plan is the most crucial decisions a parent makes.

Ideally, it is suggested to start your financial planning even before the baby comes. A new financial plan helps in avoiding hasty and abrupt decisions. Here are five investment products to secure your child’s future:

Public Provident Fund (PPF)

PPF is one of the best investment plans for your child. It is a 15-year plan, so, if you invest in this scheme when your child is newly-born or is a year old, you can build a corpus for his/her higher education just in time. You can open a PPF account in your name or your child’s name. Apart from this, you get a tax exemption of upto Rs.1.5 lakhs under Sec80c of Income Tax Act. Also, the interest earned will be tax-free for the investor.

The substantial lock-in period of 15-years gives ample time to take care of your child’s long term goals. However, the child can extend the account in a block of 5 years indefinitely, invest to save tax, and reap tax-free proceeds.

Sukanya Samriddhi Yojana (SSY)

SSY is a government-backed scheme which aims to promote girl child and provides financial support for education and marriage expenses. You can open an SSY account only in the name of your girl child below ten years. One family can open a maximum of two accounts for two girls.

Withdrawals are allowed once the girl (beneficiary) turns 18 years. You can withdraw a maximum of 50 per cent of the total account balance of the preceding year for the higher education of the girl. Irrespective of the age the account will run for 21 years from the date of its opening.

However, the rules permit the final closure anytime before 21 years. The parent can apply for a premature closure for her marriage by confirming through an affidavit that the girl child is not below 18 years on the date of marriage.

ULIP Child Plan

Unit Linked Insurance Plan provides you with an opportunity to cost-effective market-linked investments along with a life cover. A child plan ULIP will ensure the best future for your child and will protect his/her education goals, even when you are no longer around. Benefits of ULIP for a child may include:

• At the time of death of the life insured, it provides a lumpsum Sum Assured along with monthly income benefits, which will make sure that even the present expenses of your child are taken care of on time.
• ULIP plans offer multiple investment options so that you can choose according to your risk appetite.
• It provides flexible goal planning, which means that you can choose the amount of premium you will pay or the corpus you want to create.
• ULIPs help you in regular and disciplined saving for your child’s future needs. It enables you to cater to short term, medium term as well as long term goals. It provides liquidity when you need it in case of any unforeseen event.
• The premium paid towards the policy is exempt from tax under section 80c of the Income Tax Act.

You get the dual benefit of investment and insurance through ULIPs. Reputable insurers such as Max Life Insurance offer Child Plan ULIP with the flexibility to choose from multiple policy terms, premium payment terms and sum assured multiples.

To select the best investment plan for a child; therefore, you need to make a thorough child plan comparison between different policies available in the market.

National Pension Scheme (NPS)

NPS is a government-sponsored pension scheme in which the returns offered are much higher than other tax-saving investment instruments such as PPF. It provides 8-10% annual returns. After the completion of 3 consecutive years of your NPS account, you can make a withdrawal of upto 25%  for higher education, marriage or medical treatment. However, one cannot withdraw the entire corpus after retirement.

For Tier 1 account, you have to make a yearly contribution of Rs. 6000 and Rs.500 as a one-time contribution. You can withdraw around 60% corpus on maturity while the rest 40% you must use to buy an annuity.

Upbringing a child can be quite challenging. However, the right and aware selection of policies can help you find the best investment plan for your child’s bright future.

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