Best Investment Plans for Parents to Secure Their Child’s Future

Public Provident Fund (For Minors)

PPF, or Public Provident Fund, is a government of India initiative and is governed by the PFRDA (Pension Fund Regulatory & Development Authority Act) and the central government. The scheme has a lock-in period of 15 years and can be started with a minimum investment of ₹1000 p.a.

A PPF for minors can be opened by parents for their kids. One or both parents can contribute to the scheme, and withdrawal is limited to children's requirements only. The plan offers tax benefits of up to ₹1.5 lakhs under Section 80C of the Income Tax Act of 1961.

Gold ETFs (Exchange-Traded Funds)

Indians love investing in gold. Gold ETFs can yet be another interesting option for your child's future, without the worry of storing physical gold and high making charges. This type of investment plan makes a profit from the price increase of gold. Compared to various other investment options, gold ETFs can offer higher rates of interest. However, this is a market-linked investment. So, it also has associated market risks that you must consider before investing.

Fixed Deposits

Fixed deposits are a type of investment where you invest a lump-sum amount for a fixed tenure. The rate of interest is also fixed and remains unchanged, irrespective of market conditions. Adults can open bank FDs for their kids with a specific tenure so that upon maturity, the fund can be used for the child.

Some banks have special fixed deposit schemes for kids where they offer comparatively higher interest rates. You also have the option of tax-saving FDs when aiming for a long-term deposit.

Recurring Deposits for Minors

Parents can also start recurring deposits for their minors in banks. Some banks may have specific RDs for minors, where you may start small investments at higher interest rates. In recurring deposits, the subscriber has to invest a fixed amount every month for a specific tenure.

Note: TDS on interest on recurring deposits is applicable only when the total interest exceeds ₹10,000!

NPS Vatsalya

In 2024, the Indian government launched NPS Vatsalya. This is a pension scheme meant for minors. National Pension Scheme Vatsalya is regulated by the Pension Fund Regulatory and\ Development Authority (PFRDA).

As parents, if you want to start and contribute to your child's retirement planning, NPS Vatsalya can be a good idea. The contribution begins with as low as ₹1,000 with no maximum contribution limit. The beneficiary can withdraw from it after their retirement.

Note: Annual returns in NPS accounts can range between 9.5%-10%.

Sukanya Samriddhi Yojana

If you have a girl child, the government of India makes it quite easier for you to plan for them. With the Sukanya Samriddhi Yojana, parents can build a financial corpus for their girl child. When the child turns 18, they need to operate the account on their own.

With a small investment of ₹250 per annum, a Sukanya Samriddhi Yojana account can be opened. However, the account must be opened before the kid turns 10 years old. The current interest rate is 8.2% p.a.

Note: Once 21 years of the SSY account is completed, no further interest is paid on the accumulated fund!

Mutual Funds

If you’re open to exploring market-linked investments and have the appetite for some risk in exchange for potentially higher returns, mutual funds can be a worthy choice. Investing for a longer tenure and choosing schemes as per your profile can make mutual funds comparatively more stable than other high-risk plans.

You can continue investing for your child until the funds are actually needed. Most mutual funds offer the flexibility to withdraw whenever you choose. The gains earned, however, may be taxable depending on the tenure, date, and returns on investments. Before starting an investment in mutual funds, make sure to read about the associated market risks to make informed decisions.

Conclusion

When it comes to smart financial planning for your kid, thoughtful strategy and timely action can go a long way. With Jio Insurance Broking, you can choose the ideal plan that can fulfil the upcoming future financial requirements of your child. Compare and choose from the numerous investment plans available without compromising on quality or flexibility.

Before choosing one, you must take into consideration the upcoming financial goals for your kid, the inflation rate, the need for emergency funds, etc. Start planning early so you have sufficient time to customise funds for your child!

Your financial portfolio needs to be well-thought-out, calibrated and diversified. Maintain a balanced risk profile and regularly review your investments. As your child’s needs change over time, your financial plan should adapt accordingly. Try striking the right balance between high- and low-risk options to stay on track.