How to Start Investing for Your Newborn Child?

When you bring a new life into the world, it’s reason enough to celebrate and make merry. But it is also a time to become responsible and think of his/her future. If, as parents, you are willing to give a secured and safe future to your child, you need to start planning as early on as possible. Long term investments not only give higher returns but also build a sound corpus to allow your child to live his/her life as per their will and aspirations.

Here are a few ways that will help you to start investing for your new born child and give a secured, comfortable life:

Equity Mutual Funds

Mutual funds are subject to market risks; however, with around 12% returns annually, they give higher returns compared to many other investment schemes. Although governed by the ups and downs of the stock market, and its possible risk, investing in equity mutual funds may prove to be highly fruitful in the long run. Hence, if you are a risk-taker of market fluctuations, and with a good number of years in hands, you can consider multi-cap schemes as an excellent investment option. In case you want for options or diversify your investment portfolio you can even consider large-cap schemes. Moreover, there are tax benefits that you can avail under this scheme.

Fixed Deposit

Whether you are planning to invest for your new born child or your aging parents, fixed deposit tops the list of preferable investment schemes. Investing in a fixed deposit for child can be done either through a bank or non-banking financial company. However, current FD rates in company deposit are a tad higher compared to bank deposits. Hence, it is advisable to invest in a company fixed deposit. Moreover, certain companies like Bajaj Finance offer a higher interest rate than other NBFCs, easy online application process and online account management. Investing in an FD with a minimum deposit of Rs.25000 will give you a ready corpus a few years later to manage the career or wedding expenses for your child.

ULIPS

Unit-Linked Insurance Plans give complete financial security to your young one as well as loved ones. Again, a long-term investment plan, it enables you to accumulate a large fund before your child grows up and his/her education or wedding requirements are to be met. Several life insurance products are covered with ULIPs for your child’s security. Although it has high initial costs and low liquidity, it offers tax benefits and great returns if invested for a long-term.

Sukanya Samriddhi Yojana

This scheme is specially designed for the girl child by the Government of India. The parents of a girl child can open an account in this scheme when the child is between 0 to 10 years, and reap benefits at an interest rate of 8.5% annually. Although the interest rate keeps fluctuating, it will be on the higher side to encourage the education of girl child. Also, the interest earned is tax-free apart from the tax benefit under Section 80C of the Income Tax Act. As parents, you can open the account till your girl child turns 10. Minimum deposit to open an account is as meagre as Rs.250 per year, which can go up to 1.5 lakh in a year.

Real Estate

Many parents plan to invest in real estate for their children. There are many benefits of investing in real estate as the value of a plot of property always appreciates. Either they buy a plot and gift it to their children when they grow up. Or they can buy a plot or a property, and sell it once its value is at the peak. Once sold, the amount can be re-invested or can be used for various purposes like managing academic expenses or funding the wedding. Also, it has a high emotional value and can reap high long-term returns.

While all the investment options for child are equally lucrative, going for Term Deposits will make sure that you get assured returns at the end of the investment tenor. Start investing for your new born today to give him/her a secured future.

Muhammad Saad Khan

Experienced Finance Officer with a demonstrated history of working in the marketing and advertising industry. Skilled in Microsoft Word, Income Tax, PowerPivot, Management Reporter, and Microsoft Dynamics GP. Strong finance professional with a ICMA (Part Qualified) focused in Accounting and Finance from Institute of Cost and Management Accountants - ICMA. I write finance related article in my free time on TrendMut.

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