Best Investment Plan for Your Child’s Future in India

Discover the best investment plan for child’s future in India. A step-by-step guide to secure your child’s education, marriage, and long-term goals.

As a new parent, you’re probably overwhelmed with joy, responsibilities, and a whole new set of future worries. Among the most important of these is: “How should I start saving or investing for child education and marriage goals?” Whether it’s for kid education, marriage, or general financial security, starting early gives you a massive head-start.

Let’s break this down in a simple, practical, and goal-oriented way. This guide will help you begin the financial journey for your child without unnecessary complications.

Best Investment Plan for Your Child’s Future in India

Let me explain to you the steps you have to follow while doing the investment for your child’s future. What is the right time to start the investment for your child? It is as soon as possible!!

Step 1: Don’t Rush to Open an Account in Her Name

The moment a baby is born, many parents rush to open a bank account or start investing in the child’s name. But is it really necessary? Not at this stage.

Why? Because:

• The child doesn’t have an income.
• You (the parent) will be the one investing and managing the money.
• Due to clubbing provisions, taxation will still apply to your income, not the child’s.

So, in the initial few years, invest in your own name but earmark it for your child. You can later transfer or gift the funds when the child becomes an adult.

In fact, I am of the opinion that all your child’s education or marriage goals should be invested in your name only. I know that there used to be an attachment, love, or affection. However, how your child behaves when he or she turns 18 years is very crucial. Hence, make sure to have full control over the investments.

Step 2: Define Clear Financial Goals

Before you invest, ask yourself – What am I investing for? There are usually two major goals:

1. Higher Education (Graduation) (typically after 17–18 years)
2. Post Graduation – (typically after 22 years)
3. Marriage (generally after 20–25 years)

You can also include a general-purpose fund for things like skill development, foreign exposure, or starting a business.

How to approach this?

• Estimate the future cost (e.g., for higher education, it might cost Rs 20–25 lakhs in today’s value. This includes yearly fee, hostel expenses, travel or relocation expenses). In my view, first, try to target the graduation goal. Once you are comfortable investing more than required, the next target should be towards post-graduation. Ideally, if you wish to send abroad, then it may cost you around Rs 1 Cr to 2 Cr. If it is within India, then, in my view, it may not cost more than Rs 25 lakh. After you are capable of investing in these two major goals, then you can think of the marriage goal.
• Add inflation of 8–10% per year to this. Never consider below 8% inflation for such important goals.
• This future value should be your targeted amount.
• Plan backward to see how much you need to invest monthly.

There are plenty of tools available online. You can use them or simply use the Excel functions like FV (to calculate the future value of current cost) and PMT to understand how much monthly investment is required to achieve this target. This gives clarity and purpose to your investment journey.

Step 3: Buy Life Insurance First – For Yourself

This might sound unrelated, but it’s the most crucial step.

Your child’s dreams depend on your income. If something happens to you unexpectedly, how will the investments continue?

Hence, term life insurance is essential. A term plan of at least 15–20 times your annual income is a must. This ensures that even in your absence, the financial goals for your child don’t collapse.

Remember, life insurance is not for the child; it is for the parent.

Step 4: Choose the Right Investment Options – Avoid Emotional Traps

Many parents blindly invest in traditional options like Sukanya Samriddhi Yojana (SSY), child plans from insurance companies, or recurring deposits. While these are not bad, they are not the most efficient either. Ideally, your investment should be a mix of debt and equity. Ideally set around 60% in equity and 40% in debt. But don’t forget to reduce your equity exposure as the goal is near. When your goal is around 3-5 years, then completely come out of equity assets, and everything should be in debt. This is the most important aspect of your investment journey to manage the risk and derisk your portfolio.

Do remember that your debt portfolio is meant for protection but not to generate BEST possible returns.

Let’s understand your options in simple terms:

A. Sukanya Samriddhi Yojana (SSY)

• Exclusive to girl children.
• Lock-in till age 21 or marriage.
• Interest is tax-free.
• Good for conservative investors or a portion of the portfolio.
• But limited flexibility and liquidity.

B. Mutual Funds – Equity-oriented

If your goal is 15–20 years away, then equity mutual funds are your best bet.

• Long-term returns can beat inflation, but not GUARANTEED.
• Make sure that not invest more than 60% of your total investable surplus into equity.
• SIPs (Systematic Investment Plans) help with disciplined investing.
• Choose a simple Aggressive Hybrid Fund or Flexi Cap Fund to begin with. Otherwise, a simple Nifty 50 + Nifty Next 50 Index Fund is sufficient for you (Refer to my recommendation “Top 10 Best SIP Mutual Funds To Invest In India In 2025“.

C. PPF or Debt Mutual Funds

If you have a baby boy, then you can open a PPF account in his name (you as guardian). But do remember that the maximum allowable limit in your account and your child’s account is Rs. 1,50,000 a year. Hence, if your investable surplus is more than this, then no option but to choose debt mutual funds. Ideally, you don’t need more than two categories here either. Choose a combination of Money Market Fund and Gilt Fund. This will create the best combination for you to manage the future interest rate risk volatility.

You don’t need a long list of funds. One or two diversified funds are enough. Always link your SIP to your goals. Don’t invest just because you can. Invest because you should.

Step 5: Keep Your Investments Simple and Trackable

You don’t need a demat account or fancy stock-picking ideas to grow wealth for your child.

• Start a monthly SIP.
• Review it once every year. Maintain the asset allocation properly between equity to debt.
• Gradually increase the SIP amount as your income grows (called SIP step-up).
• Keep the portfolio minimal – avoid over-diversification.

Keep one thing in mind that your strategy, plan or products must be understandable for your spouse and your child (after few years).

Step 6: Avoid Insurance-cum-Investment Products

Many parents fall for marketing gimmicks like “child plans” or “guaranteed returns for your child’s future.”

Please avoid these for the following reasons:

• Low returns (5–6% in many cases).
• High charges.
• Poor flexibility.
• Misleading projections.

You’re better off keeping insurance and investments separate.

Buy a pure term life cover + invest the rest in mutual funds. That’s the best strategy.

Step 7: Don’t Forget the Power of Incremental Growth

Let’s say you start investing Rs.5,000 per month in a mutual fund for the next 18 years. Assuming an average return of 11% annually:

You’ll accumulate over Rs.30 lakhs – tax-efficient and flexible.

If you increase it by just Rs.500 every year (step-up), the corpus grows significantly.

Small increases today = Big results tomorrow.

Step 8: Plan for the Transition to the Child

Once your child turns 18, you can:

• Open a bank account and demat in her name.
• Transfer the investments or redeem and reinvest as needed.
• Educate her about money management.

You can even start a financial education journey when she is a teenager by involving her in tracking her investments.

Step 9: Create a Will or Nominate Properly

You’re doing all this for your child. But if something happens to you, who gets access?

• Nominate your spouse or child appropriately in your investments.
• Create a basic Will once you accumulate a sizeable amount.
• This ensures smooth transfer and usage of the funds.

Conclusion: Focus on Discipline, Not Complexity

Investing for your newborn daughter doesn’t need complex strategies or products. You only need:

1. Clear goal
2. The right insurance purchase (Term Insurance) to protect against the loss of your life.
3. The right mixture of debt and equity.
4. Managing the asset allocation strictly is very important.
5. Finally, discipline and patience. Rest everything is NOISE.