Investment plans for children not only offer financial security but also provide flexible investment options which help create wealth over a period of time. These plans offer dual benefits of investment & insurance, hence offering financial security & allowing the creation of wealth. These plans are linked to the market, hence offering higher returns. Let us discuss different investment options available to secure the children’s future.
Different Types of Investment Plans
Provided are the different types of investment plans:
- ULIP
ULIPs are insurance cum savings plan which allow you to invest to meet your short-term &long-term financial commitments along with providing life insurance coverage. The premium amount paid is invested in the funds opted for, & the rest is allocated towards life insurance coverage. It is an appropriate investment plan for children as it is market-linked.
- Features:
- It also provides an option to switch between the debt & equity funds with your changing requirements & the life milestones you reach.
- The funds can be allocated depending on the future financial objectives & risk tolerance level.
- In case of any immediate expenses related to the child, invest in a debt scheme. In case a requirement arises in another 5-10 years, opt for equity schemes.
- The funds invested generally cannot be withdrawn in the lock-in period, i.e. 5 years, & a surrender fee is charged in case funds are partially withdrawn before 4 years.
- The premium paid on investments can be claimed as a deduction of a maximum of INR 150,000. The payouts received on maturity are exempt from tax u/s 10(10D).
- SIP
A Systematic Investment Plan (SIP) is a financial tool that allows an investor to invest regularly in mutual funds on a specified date. These plans are flexible, which helps build wealth over a period of time by reducing risks & dealing with market fluctuations. It involves investing small portions of the amount regularly, which makes it suitable for those pondering diversification of funds appropriately.
- Features:
- The Rupee cost averaging followed in the SIP helps investors to mitigate the risk of market fluctuations.
- Regular contributions of money towards SIP build a disciplined approach, which further leads to regular savings, consistent investments, & wealth creation.
- This plan allows investors the flexibility to choose the amount to be invested, which makes this plan suitable for every income class with different financial standards.
- Under this plan, the professional fund managers help in decision-making depending on the investor’s financial objectives & market fluctuations.
- SIP allows investors to plan investments to achieve long-term wealth creation with consistency, discipline & compounding power.
- SIPs allow investors to pause their investments, which are resumed automatically once the pause tenure is completed.
- It allows you to invest any amount starting from as low as INR 100 with no upper limit.
- Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana (SSY) is a government-backed child savings plan designed to secure the financial future of a girl child. It was launched in 2015 under a government scheme called “Beti Bachao, Beti Padhao for a girl child’s welfare. This child plan is considered to be an ideal plan for the parents of a girl child as it aims to offer financial security to them, hence helping to meet their girl child’s education expenses, marriage expenses or any other future needs.
- Features:
- The account can be opened at any time before the girl’s child reaches the age of 10 by her parents or a guardian.
- The minimum amount of deposit is INR 250, which can range up to a maximum deposit of INR 1,50,000.
- The scheme has a tenure of around 21 years from the date of account opening, which ensures growth & long-term savings.
- The maximum period for a deposit is 15 years from the date of account opening.
- Interest is done monthly & compounded annually.
- This scheme allows the account holders to withdraw 50% of the account balance to fulfil the higher education & marriage post 18 years of age, providing financial security & support.
- PPF
A Public Provident Fund is a type of long-term investment plan backed by the government of India, offering attractive interest rates along with returns. The amount to be deposited in the fund ranges from INR 500 to INR 1,50,000 each financial year, either in EMIs or lump sum. The amount deposited, maturity amount & interest amount are totally exempt from taxes.
- Features:
- One can open a PPF Account with a nominal amount of INR 100 per month.
- It is a long-term investment plan for a period of 15 years, which can further be extended by 5 years.
- The minimum investment limit is INR 500, & the maximum limit is INR 1,50,000 every financial year. The investment amount can be deposited either in EMIs or in a lump sum.
- The mode of deposit can be cheque, cash, online fund transfer, or demand &draft.
- The funds should be deposited into the PPF account a minimum of once each year for 15 years.
- A PPF account cannot be opened in joint names; i.e. it can be held in the name of a single individual.
- An account holder can also be appointed for a PPF account at the time of opening a PPF account or later on.
- As per section 80C of the Income Tax Act, 1961, the maturity amount & the proceeds from interest are tax-free.
- PPF offers guaranteed & risk-free returns along with capital protection because the government backs it.
- This account allows the partial withdrawal of funds from the 5th financial year onwards.
Conclusion
One should think about the child’s future while considering an investment plan. These plans ensure financial independence for the children & allow them to accumulate a huge corpus over the long term due to the power of compounding. While choosing a plan, one should consider the risk tolerance level, investment horizon, liquidity, tax savings options, etc. For tailored funding options and to explore financial solutions that can support your child’s future, visit webpage.
