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.
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!!
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:
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.
Before you invest, ask yourself – What am I investing for? There are usually two major goals:
You can also include a general-purpose fund for things like skill development, foreign exposure, or starting a business.
How to approach this?
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.
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.
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:
If your goal is 15–20 years away, then equity mutual funds are your best bet.
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.
Keep one thing in mind that your strategy, plan or products must be understandable for your spouse and your child (after few years).
Many parents fall for marketing gimmicks like “child plans” or “guaranteed returns for your child’s future.”
Please avoid these for the following reasons:
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.
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.
Once your child turns 18, you can:
You can even start a financial education journey when she is a teenager by involving her in tracking her investments.
You’re doing all this for your child. But if something happens to you, who gets access?
Investing for your newborn daughter doesn’t need complex strategies or products. You only need:
Copyright © 2019-2024 Bytesdaily All rights reserved. About Us | Contact Us | Disclaimer | Terms Of Use | Privacy Policy