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How to Choose the Best Child Investment Plan?

Published On Oct 16, 2021

With the passage of time, the cost of education is increasing at a rapid pace. Parents are becoming highly concerned about their capability to provide their children with the best of education. Shortage of funds may be one of the biggest hindrances that parents may face, however, there are also ways which can ensure that children do not compromise on their education and other dreams due to lack of money. While you may want to provide and contribute to your child’s education by funding educational plans, it would also be important to remember not to put your personal financial stability at risk. If you are considering education loans or self-funding by your child after a certain level, go ahead with the plan. If you find it difficult and confusing to choose the best way to invest for your child, there are a few things you need to know. 

How to Choose the Best Child Investment Plan?

Below mentioned are some of the key aspects you must consider to choose the best child investment plan:

  • Investment Strategy - Start by making a list of all the different goals, like your son or daughter’s desired education and the associated costs. Doing so will help you in determining the amount you would require saving each month as well as assessing the amount you can afford after meeting all your regular expenses. Remember, that you can also fund your child’s studies with the help of loans. So, there’s no need for you to fund your child's education by cutting down on your healthcare, retirement and other needs. 
  • Inflation Quotient - While looking for one of the best investments for a child, one must always keep the inflation quotient in mind. Why? It is because inflation leads to a massive rise in the cost of education on a yearly basis. It must be noted that in general, the cost of education increases faster than the inflation rate. Hence the requirement to start saving for children's education early while considering the time factor is of high importance. 
  • Different Options for Investment - You may be planning to invest in FDs to meet the educational expenses of your child. However, note that investing only in FDs won’t be sufficient. Equity funds, balanced funds, and shares are also investment options that you can consider investing in on the basis of time horizons. Below mentioned are some of the options that you can consider as per the time horizon:

1. If you have a time limit of 5 years before your child would require the corpus, choose to go with debt mutual funds as you would be able to gain returns higher than the inflation quotient while providing liquidity at the same time.

2. In the case of long-term goals, you can easily combine different financial instruments like debt, equities, and gold. 

3. Public Provident Fund or PPF is also one of the best investment plans for the purpose of child education. However, it is advisable to start PPF investment early and invest consistently in building a huge corpus.

4. There are many insurance companies that provide children-focused products. You can simply invest in policies that mature when the child needs the money to pursue higher education.

Now that you are aware of what approach to follow for finding the best investment plan for a child, go ahead and get started with the same. Make sure you teach your children the habit of saving from their early childhood. Rest assured, it would benefit them a lot.

Also Read: 

Reasons Why One Must Invest In A Child Life Insurance Plan

Child Insurance Plan for Education and Marriage

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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