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Best Investments for a Child in 2021

Updated On Jul 30, 2021

Investing in a child is important but you need to invest in a plan that favorably covers all the goals you have for your child. To pick a suitable investment plan, you must compare various aspects and know how much you have to save for the child’s future. Choosing an efficient option can be time taking but you must not neglect to compare all the aspects and different plans before investing in a child. A few considerably efficient options are PPF, buying Gold ETFs, Child plans, and mutual funds.

Best Investment Options For Your Child in 2021

Below are 4 of the best investment options you can choose to invest in.

  • Public Provident Fund (PPF)

You can open a PPF account for your child even if you have one for yourself. The maximum amount that can be put into the accounts combined is Rs 1.5 lakh. It is advisable to have an account in your child’s name though you have one for yourself. Contributing to both of them simultaneously is a better way to save and grow your investments. The maximum deduction of the principal investment in a PPF under section 80C of the Income Tax Act, 1961 is Rs 1.5 lakh per financial year. The investments that you make in both accounts qualify under tax benefits.

  • Gold ETFs

Another effective investment you can make for your child is to buy gold. This does not have to be physical gold. You can efficiently buy through gold ETF(gold exchange-traded funds). Gold ETFs represent paper gold. They are similar to buying MF units. You can buy small amounts of gold consistently through months and accumulate gold over a long period. You can also buy Sovereign gold bonds (SGB) that are issued by the government regularly. These come with a maturity period (8 years). The lock-in period ends at the 5th year of investment. 

  • Child Plans with Waiver Premium

Some life insurance plans are built to fulfill the needs of a child. They come with a waiver Premium rider or benefit that is efficient in helping a child. The waiver feature in a life insurance plan is to ensure that the plan does not end even if the parent or the guardian passes away due to unpaid premiums. The sum assured is paid for the child by the insurer. 

  • Mutual Funds

A minimum of 7 years away from being an adult can be considered as a good age to invest in equity mutual funds by young parents. You must build a portfolio consistently performing schemes across large-cap and mid-cap funds. 

Things you must Remember while Investing in a Child

While planning for investment in your child’s future, there are some things you must remember and plan accordingly. Below are some such things you must remember -

  • Start early. Starting as soon as you can, advisably when your child is just born will give you much better returns as it will give you 17 to 18 years to save and grow before your child starts their higher education and a few more for them to get married.
  • You must plan deeply before starting an investment. Taking the help of an investment advisor and constructing a plan for your investment can give you an organized plan to follow.
  • Compare various investment options and consider your financial stability, your ability to invest, your risk horizon, and suitability, and pick a favorable investment option for your child to be able to have a hassle-free investment.

Conclusion

Investing in a child must be carefully planned. The goals must be clear before you invest in a child’s future. You must remember to compare different plans and options to pick a suitable investment plan for your child. This will help the child in the future when they want to study higher studies or to cover their marriage expenses when they decide to get married. 

Also read 

What Rider Should Be Purchased With A Child Life Insurance Plan?

Pros and Cons of Life Insurance for Children

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.        

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