Children's Day 2024 celebrates the innocence and potential of every child. For parents, the occasion can be an opportunity to rethink their future planning for their kids. Sound planning requires well-calibrated and smart investments in options like mutual funds, fixed deposits and other schemes.
Multiple government schemes have been launched for parents who want to invest in their children's future. For example, Sukanya Samridhi Yojana, NPS Vatsalya, etc. As we celebrate Children's Day 2024, learn about the top investment options to secure children's financial future.
The most popular investment plans for children include PPF for minors, Fixed Deposit schemes, mutual funds, gold bonds, gold ETFs, etc.
A Public Provident Fund (PPF) for minors can be a good way to create a long-term savings corpus for the minor's future needs. However, to reap the benefits, it is important to invest in the PPF consistently.
Key features of a PPF account for minors include a 15-year lock-in period, tax benefits, compounding, etc. The PPF for minor funds can only be withdrawn from the account when that amount is used to benefit the minor. Additionally, there is no restriction on either parent or both parents contributing to their child's PPF.
Adults can open an FD for their children by mentioning themselves or their partner as the guardians. A few banks also run their own FD schemes oriented towards children, and some of these schemes also provide returns at a higher interest rate. PNB Balika Shiksha Scheme, PNB Uttam Non-Callable Term Deposit Scheme, Yes Bank Fixed Deposit for Child, and SBI FD for Child are a few examples of child-specific FD schemes launched by Indian banks.
The Indian government recently launched the National Pension Scheme Vatsalya (NPS Vatsalya), a pension scheme for Indian minors. NPS Vatsalya is a contributory scheme which is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The scheme can be a contribution by parents to their child's retirement planning. Parents can invest a minimum of Rs1,000 per month with no upper limit. The scheme offers Market-Linked long-term investments.
Gold Exchange-Traded Funds (ETFs) can provide a higher return than low-risk investment instruments like FDs and bank accounts, and that too at a lower risk compared to the stock market. Gold ETFs will allow investors to invest in gold and make gains from its price increase.
Like FDs, many banks offer child-specific Recurring Deposit plans, which can provide benefits like smaller investment sums and comparatively higher interest rates. An RD account ensures the investment of a fixed sum of money each month for a fixed tenure. People can also get fixed interest on their savings.
People with a higher risk appetite can include mutual funds investments in their child-saving plans. Unlike stocks, mutual funds are a safer option for investment in stock markets, with lesser risks to stocks and higher returns than conventional investment instruments.
The Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme that parents can use for their girl child. The scheme offers tax benefits on principal, interest, and even monthly maturity amounts and offers an attractive interest rate. Anyone can open an SSY account for their girl child and start investing with a minimum amount of ₹250. The account must be opened before the girl child turns 10.
