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Wednesday 29 January 2020
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5 long-term investment options for your child

5 long-term investment options for your child

Parenthood can be one of the crucial milestones of your life. When you become a parent, you might put everything behind to ensure your child’s happiness in the long run. Planning your child’s future as well as meeting their financial requirements is crucial. As a parent, you might save money and give up on your dreams to ensure your child lives comfortably in the future.

As your children cross the milestones in their life, their financial needs increase. Due to the increasing needs of your children, your savings might not suffice them. Therefore, you should look forward to investing for fulfilling their dreams. Investing can not only offer financial protection in your absence but also allow the growth of money. Let’s go through these top five long-term investment plans for your child:

  1. Unit Linked Insurance Plan (ULIP)

A ULIP plan is a flexible and affordable type of investment plan for your child’s dreams. Under a ULIP plan, you can guarantee the financial security of your child since it offers life coverage. Many ULIPs might even provide the waiver of premium benefit, which waives off the premium for your child in your absence. After your demise, your children would continue to maintain the current standard of living without any financial constraints.

  1. Traditional Life Insurance

The main purpose of a life insurance policy is to provide financial protection to your loved ones. Traditional life insurance acts as a financial cushion, which can protect your child in the long run during an unfortunate event. However, the benefit of traditional life insurance usually depends on the type of policy selected. Under traditional life insurance, you can purchase the following:

  1. Bank Fixed Deposit

A bank fixed deposit can provide you with a guaranteed interest rate for a specific tenure. It has been a popular type of investment option for a long time in the Indian market. A bank fixed deposit has a lock-in period of five years. Since it falls under Section 80C of the Income Tax Act, it offers tax benefits. Although it helps you to reduce your tax liability, the earned interest after deductions can be taxable.

  1. Mutual Fund

Mutual funds are investment products, which offer market-linked returns. A mutual fund is categorized into two different types:

  • Equity Mutual Funds

Under equity mutual funds, the risks can be high since it allows participation in only equities. If you can bear high risks, you should put your money in equity mutual funds.

  • Debt Mutual Funds

Under debt mutual funds, the risks can be relatively high than equity mutual funds.

  1. Public Provident Fund (PPF)

A PPF account is a financial product, which can offer maximum safety. It is an investment plan introduced by the government of India decades ago. Due to compounding, PPFs allow the growth of your corpus to accomplish your child’s needs. When your child is young, you can open a PPF account in your name. If you open a PPF account early, you can have a high chance of collecting funds for your child by the time he grows older. Moreover, you can transfer your PPF account to your child once he is older.

To sum up, before purchasing an investment plan for your child’s future, you should decide the financial target. Moreover, you should start your investments as early as possible to get substantial return on investment and grow a substantial corpus for your child’s future. A proper financial plan secures your loved ones for the longest period in the future against contingencies.