Planning for your child’s future financial security is one of the best gifts you can offer. Children’s investment plans provide a structured way to build a solid financial foundation that can cover major expenses like education, health, and even early career goals. Also, these plans are designed to be flexible and to adopt to your family’s needs offering peace of mind and the security of knowing your child’s future has a strong financial foundation.

In this article will discuss the best investment plan for children that you can consider investing in.

– What is a Children Investment Plan?

A Children Investment Plan is a financial product designed specifically to help parents save and invest for their child’s future needs, such as education, weddings, or starting a business. These plans often combine insurance coverage with investment options, offering both protection and growth potential.

– Different Types of Children Investment plan

1. Unit Linked insurance Plan (ULIPS)

Due to fund alternatives that provide steady returns, low levels of risk, or both, ULIP have become more popular. As a result, many insurance companies, banks, and financial organizations offer these plans in India, allowing policy purchasers a variety of alternatives to select from. Your money will generate high returns throughout the vesting period, assuring good ROI on the investments and supporting your little one’s educational costs in the future. Over a long-term, ULIPs are expected to generate returns ranging from 10% to 12%.

2. Mutual Fund

With mutual funds, you can invest your money in market securities like equity, debt, and cash as per your risk appetite and goals. For instance, you can invest in debt mutual funds for low-risk stable returns or equity mutual funds that offer the potential for higher returns. You can also invest in mutual funds regularly through Systematic Investment Plans (SIPs) or as a lump sum, as per your requirements. Thus, flexibility which mutual fund offer is impressive & MF’s can potentially give returns of 15% or even upwards if invested for longer term.

3. Public Provident Fund (PPF)

PPF is the one of the most reliable investment schemes & one of the apt child plans for investment in India. It has government backing & provides guaranteed returns. A PPF investment can be started with a minimum of Rs. 500 & maximum of Rs.1,50,000 per fiscal year. The current interest rate for PPF is 7.1% for Q3 of FY 2024-25.

4. Sukanya Samriddhi Yojana (SSY)

Several government-sponsored saving plans also assist investors in accumulating adequate funds for the higher education of students.

For example, Sukanya Samriddhi Yojana is a government-sponsored savings plan that works well for conservative investors looking to put money towards their daughter’s education. SSY is a low-risk investment that can save you up to ₹1.5 lakhs in taxes under Section 80C of the Income Tax Act. However, if you have a girl kid, you are only entitled to invest in the plan. Furthermore, under this arrangement, a family can only open a maximum of two accounts. There is fixed interest rate in this scheme which is 8.2%.

5. Moneyback Policy with Insurance

A money back policy (also referred to as a money return policy or cash back insurance policy) is a unique life insurance plan that not only provides life cover but also offers the benefit of periodic returns during the tenure of the policy. In such a policy, a certain percentage of the sum assured is returned to the policyholder at regular intervals. This is known as the ‘Survival Benefit’. If the policyholder survives the entire policy term, he/she receives the balance sum assured. If the policyholder unfortunately passes away during the term of the policy, the full sum assured is paid to the nominee, regardless of the survival benefits already paid. The rate of return offered is typically not more than 7% in longer term.

– Benefits of a Children Investment Plan (CIP)

1. Long-term Savings: CIPs encourage regular savings over a long period, helping parents build a significant corpus by the time their child reaches critical milestones.

2. Wealth Creation: By investing in market-linked instruments, CIPs can offer returns that outpace inflation, helping your savings grow over time.

3. Financial Security: Many plans include insurance components that provide financial protection in case of unforeseen events, ensuring your child’s future is secured.

4. Tax Benefits: Contributions to certain investment plans can offer tax deductions under prevailing tax laws, allowing parents to save on taxes while investing for their children.

5. Flexible Options: CIPs come with various investment options, including mutual funds, stocks, and bonds, giving parents the flexibility to choose according to their risk appetite.

– RichVik Suggestion on Children Investment plan

Above table shows the returns on each of the investment option on the basis of their returns.

For an example, you started an Rs. 10,000 monthly SIP in an equity-oriented fund as soon as your child was born. The investment period is 21 years, and the scheme’s average annual return is 15%. Given the compounding benefit, you will see a capital appreciation of around Rs. 1,77,27,000 in this case.

So, we recommend that rather than going into any other scheme invest in mutual funds scheme through SIP. This method helps in building a substantial corpus over time, making it particularly suitable for long-term goals like funding a child’s education or other milestones. Also, people who can invest in SIPs & also has surplus funds can invest other investment scheme so that they can have a proper asset allocation & can also diversify their risk. Thus, a simple decision but wisely taken can not only ensure that you create a substantial corpus but also that you give the best gift to your children.

To understand more on the topic as well as to start investments please feel free to contact us:

Phone: +91-9324609115

E-mail: team@richvikwealth.in