How to Secure Your Child's Future Using Child Investment Plan?
Becoming parents is a great moment in our lives, as it completely transforms our life. Being guardians it’s our duty to make strategy for their future and invest prudently to provide them the best possible amenities that in turn will privilege them with better opportunities in this competitive realm.
To achieve such goals, you need sophisticated and early planning, dedicated religious zeal towards the goal and may have to take planned risks occasionally.
Planning your child’s future covers the range of their complete needs such as marriage, lifestyle, education and so on. You need to recognize the suitable investment opportunities at a right time so that you can be able to accomplish your financial objectives. Furthermore, you require hitting a correct asset allocation balance as you move ahead towards each of the financial objective fixed for the better future of your child.
In this guide, I will introduce you with the best investment plan for child you can make for his fruitful future.
Yes, you guess it right! Saving will only exist for some duration and may become exhausted at the time of unavoidable situations, but a parent insurance policy is the subsequent roof for his reliant. Such an arrangement would assist your kid with his educational requirements that would otherwise be tougher to complete in the nonexistence of insurance.
Various child investment plans also provide a fixed amount once the child reaches a specific age for higher education which will look after his higher education expenditures.
Planning for child’s marriage and education
Child’s education and marriage are the two major aspects of his life where he may need the highest capital as a support from his/her parent’s side. You can approach to parents who have children pursuing their higher educations. On the basis of which you should contemplate the present cost of such expenditures.
After that, recognize the time horizon. I mean how many years are remaining for your kid’s graduation and further studies at present. This is the time period in which you have to accumulate the needed wealth.
When it’s about marriage, it varies from society to society. Therefore, despite of depending on some other sources, it is great to examine the marriage expenditure in your society in the current circumstances.
During planning of your child marriage, dredge up that you can’t delay your child’s graduation and further higher studies. Therefore, they are certain in nature. However, it may not be the case with marriage. It may be either planned or postponed.
Products You Can Pick for Investment Planning
An appropriate balance of various sorts of investments along with complete awareness of inflation and return estimation, the current cost of goal, time horizon of goal etc. can boost the investments returns to a greater extent. Here are the products which you can involve in your portfolio.
- Equity - You can make an ideal investment in equity by choosing one small-cap mutual fund, one large-cap mutual fund and one mid-cap mutual fund. These funds are sufficient to organize your equity portfolio.
- Debt - To make investments in debt, you can go for Short term gilt funds, PPF and Ultra short term debt funds.
Still, if you are not willing to isolate debt and equity in a distinctive product, then you can opt for equity-based balanced mutual funds. In these kinds of funds, the ratio between equity and debt is generally around 35:65.
Don’t forget to authenticate the eminence of debt portfolio-the holdings of fund and your equity portfolio market cap.
The further thing which you need to identify is asset allocation between equity and debt. Though there is no as such fixed rule. Nevertheless, I am suggesting the given rules which can be beneficial to follow.
- If the goal is less than the duration of 5 years - Stay away from equity product. Instead go for debt schemes of your choice such as Debt Funds, RDs or FDs.
- If the goal is between 5 to 10 years - Distribute equity: debt in the ration of 70:30
- If goal is beyond 10 years - Distribute equity: debt in the ratio 70:30
Investment in gold is another good option. But avoid doing it by physical gold rather go for gold ETF’s. It would be a better option, as you won’t need to pay for locker and any other kind of storage charges. As the investment made would be in electronic form so you can stay free from worry of theft.
You can invest in little chunks every month and can accumulate a huge amount in a long-term. Gold has delivered considerable better returns among majority of asset classes in longer duration. Usually a holding time of around 10-15 years could consequence in satisfactory gains.
Mutual Fund Investments for Minors
You can opt to invest in mutual funds on the name of your minor kid without any restriction of age limit and the investment amount.
Always remember, if you hold funds in this way you will no longer be allowed to re-allocate them without the permission of the child, once he turns major. For better flexibility, you can hold it on your own name.
Read Related Blog: Why Invest in Mutual Funds for Your Minor?
Return You Get on Investment
Once you recognize the time horizon, inflation rate, the cost of graduation or higher studies in current scenario, the further step is to categorize the asset class and the expectancy of estimated return.
I would recommend that should preferably retain around 10% to 12% from equity and 7% returns from debt. However, if your policy or instruments yield more than these estimations, then you may achieve your goal before the expected time and can enjoy the remaining as a bonus.
Future planning of a child by choosing a best child saving plan is a not an easy task. It takes much more than just keeping funds separately for his/her future needs.
Along with investment, you should also teach your child the value of money and how to spend it. This will aware them about your hard earned money and they will become less demanding as well.
Mr. Ajay Kumar Jain, M.Sc, Chairman And Managing Director
Being the Chairman And Managing Director, he focuses on holistic investment planning and wealth management and tries to make investment planning simpler for retail and HNI investors. Investor education is one of the prime things that Mr. Ajay Jain focuses on as he believes financial education is the foundation of successful investing. With over two decades of experience, Mr. Jain has made a mark in the Indian mutual fund industry due to his compassion and sheer hard work.