Investing in your child’s future is one of the most important financial decisions you can make. In India, individuals can browse a wide range of child investment plans. These are designed to cater to various educational and personal development needs.
Learning more about these options could help you make an informed decision. Here’s an in-depth look at some of the best child investment plans available in the country:
Child Insurance Plans
Child insurance plans combine the benefits of a life insurance policy with wealth-building opportunities. These are designed to provide payouts at important milestones in a child’s development.
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LIC New Children’s Money Back Plan: This money-back plan is tailored to meet the needs of growing children. It is aimed to provide financial support for education, marriage, etc. The plan provides survival benefits at different stages of the child’s life.
For example, the beneficiary is given a 20% payout from the sum assured when the child reaches the age of 18, 20, and 22 years. A maturity benefit is also offered, which amounts to 40% of the sum assured.
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ICICI Pru SmartKid Solution: This child insurance plan is offered by ICICI Prudential. It enables parents to choose between different ULIP options. This provides flexibility in terms of investment. Herein, your money is invested in equity and debt funds for a long time. It may lead to potentially higher returns linked to market performance.
Child Mutual Funds
Mutual Funds could be a great option to invest in your child’s future. They may offer potentially higher returns. You can opt for either equity or balanced funds, depending on your risk tolerance. Some options that you can consider include:
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HDFC Children’s Gift Fund: This is a high-risk open-ended fund. Mr. Chirag Setalvad and Mr. Anil Bamboli manage this mutual fund. The invested amount is locked in for 5 years or until the child reaches the age of 18, whichever is earlier. About 65% to 80% of the amount is invested in equity-related funds.
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SBI Magnum Children’s Benefit Fund: By paying a minimum SIP of ₹500, you could get started with shaping your child’s financial future. Mr. Rajeev Radhakrishnan, Mr. R. Srinivasan, and Mr. Pradeep Kesavan manage this mutual fund. Through this scheme, invest in a mix of debt and equity securities. The fund’s objective is to generate high returns suitable for long-term goals.
You could also explore other types of mutual funds depending on your plans for your child.
Public Provident Fund (PPF) for Minors
A PPF account can be opened in the name of a minor by the parent or legal guardian. This is a popular long-term investment option due to its tax-saving benefit. It is a safe investment avenue that comes with a fixed interest rate and a 15-year lock-in period. This can be extended in 5-year blocks. It provides returns that are often higher than those of traditional savings accounts.
Sukanya Samriddhi Yojana (SSY)
The SSY is part of the ‘Beti Bachao Beti Padhao’ initiative, launched in 2015. It is a scheme specifically designed for the girl child. You can make an annual investment ranging from ₹250 to ₹1.50 Lakhs in the SSY account. You can only make contributions in the first 15 years of opening the account.
The account can be opened at any post office or authorised bank within India. Investments under SSY are eligible for tax exemptions under Section 80C of the Income Tax Act, 1961. You can enjoy tax benefits of up to ₹1.50 Lakhs.
Unit Linked Insurance Plans (ULIPs)
ULIPs for children invest a portion of the premiums in equity markets. This provides you with the dual benefits of life insurance and investment. Some options you can consider include:
1. HDFC SL YoungStar Super Premium
The HDFC SL YoungStar Super Premium is a versatile child plan. Here are its key features:
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Investment Options: It offers four investment opportunities ranging from conservative to high-risk options. These include Income Fund, Balanced Fund, Blue Chip Fund, and Opportunities Fund.
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Flexibility: You can switch between funds as per your risk appetite. This enables you to get through the fluctuations in market conditions quite comfortably.
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Partial Withdrawals: This feature enables you to withdraw a portion of the fund after 5 years. This can be useful for covering intermediate expenses like education.
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Death Benefits: In case of the parent’s unfortunate demise, a lump sum is offered to the child. Also, all future premiums are waived off while the policy benefits continue.
For more detailed information, you can visit the official website of HDFC Life.
2. Aviva Young Scholar Advantage
This ULIP could provide financial security for your child’s educational needs. Here are some notable aspects of the plan:
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Insurance Coverage: The plan offers a comprehensive life insurance cover for the parent. It further ensures that the child’s financial needs are met even in the parent’s absence.
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Investment Growth: Premiums paid are invested in funds of your choice. You can choose from up to 7 different funds. These can be either in the form of equity or debt. This could help you earn higher returns.
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Loyalty Additions: This plan rewards your loyalty by adding extra units to your funds. This enhances the potential for additional returns.
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Mechanisms to Reduce Risk: The Systematic Transfer Plan moves investments from debt to equity to protect you from market volatility. These shifts are made based on the market conditions. Meanwhile, the Automatic Asset Allocation adjusts the asset mix as the child ages. This ensures that as the policy matures the risk associated with investments reduces.
You can explore further details on Aviva’s official website.
Factors to Consider When Opting for a Child Investment Plan
When choosing an investment plan for your child, consider the following factors:
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Purpose of the investment (education, marriage, etc.)
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Your risk appetite
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Period for which you wish to invest
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Financial product’s flexibility and benefits
It is important to start investing early to take advantage of the power of compounding. You could also consider getting FDs to systematically save over longer tenors. Consider the maximum FD limit and the interest rate the scheme offers. This will help you make an informed decision.
Each of these plans offer distinct advantages and come with specific considerations. So, it is essential to assess them based on your child’s needs and your financial capabilities. Consult with a financial advisor to find a plan that best suits your goals. Compare your investment options on digital marketplaces like Bajaj Markets. Simply, visit the website and get started with your research. This could help you make informed decisions.