The process of securing a child’s future through investments in education and health is the perfect sum up. A parent needs to devise a plan that starts early in accumulating a solid corpus. That pays for your child’s dream even in your absence.
Child investment plans aim at bettering a child’s future by looking after the well-being of the child. These investments are collaterals that pay for uncertainties. These could include financial hardships, job loss to the death of parents.
The children can fund their education all on account of the investments. The same guarantees on the child not having to make compromises in life.
Saving separately for child investment plans gives the parents the security of not having to consume the other monetary funding’s saved for other accords.
Factors clouding Investments
Some of the issues that need to be chalked out before investing are as discussed below:
Investment objective lets one decipher monetary valuation. The fund covers any related expenses from education, marriage, or giving an impetus to a child’s career. Setting a clear goal gives that needed push to invest wisely.
The period related to child investment plans is the denominator for calculating the returns. Longer tenure serves the best in accruing the most returns.
The lock-in periods for savings are usually for the longer-term. The longer the duration the higher the returns. This helps in panning out fears related to market volatility as well as inflation. Thus, allocating enough funds to save for a child’s dream.
The investments come with their own baggage of expenses. This includes charges for allocation, fund management, administration to mortality, etc. These charges get deducted annually.
Hence one should evaluate all the available policies and choosing the best investment plan that has the least expense ratio and greater returns.
Risks are a part and parcel of child investment plans. Market volatility is the major one that reduces returns for a given security cover. Hence longer-term options are better for investments that aids in averaging these volatilities.
Different investments have different taxation. Hence chalking out the tax liability cover before investing is the best measure. This enables reducing the outflow of funds as tax.
Most Suited Child Investment Plans
Child investment plans ensure the gathering of considerable returns over a longer period. Some of the examples are given below:
Mutual Fund Equities
Mutual fund equities are great wealth generation tools. However, this comes vexed with complexities associated with market volatility. But a thorough study enables one to evade risks and get the best of returns. Only redeeming when the market valuation is at an all-time high.
Debt Mutual Funds
A better choice to invest for your child’s plan is debt mutual funds that offer higher returns and is more efficient compared to bank fixed deposits. Funds rendering AAA security schemes is the most righteous of choice.
Systematic Investment Plan or SIP
Systematic investments let one invest periodically in mutual funds. This entails automatic deduction from saving accounts of the policyholders.
A goal-based investment ensures accumulating funds over a longer period with significant returns. They come with exclusive benefits of partial withdrawals.
Gold is an investment option that ensures greater returns. Exchange-traded funds or Sovereign Gold Bonds are multiple variants that come sans risks and additional expenditures.
A lot of consideration goes into deciding the right investment plan from risk appetite to investment tenure etc. Financial readiness can be achieved through saving over longer periods gaining higher returns.