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6 Best child investment schemes and their pros and cons
Posted on: 22/Mar/2019 10:56:08 AM
What could be the better gift than to secure your child’s life with the best insurance plan? It is imperative for every parent to insure their child’s life. At the same time, it is necessary to check out a few factors before making your investment towards insurance. This includes inflation rate, educational expenses, premium rate and so on. Based on these factors, here we have 6 of the best insurance schemes to secure your child’s life. Check them out and identify the best that suits your budget and need.
1. PPF
Of all the child investment schemes, the PPF is considered as the best because of several reasons. The scheme has been prevalent since 15 years. With this, you will be able to build complete education for your child. Its present interest rate is 8 percent which beats that of bank rate that is 7.5 percent. As the RBI is increasing the rate of interest, it is promising that the interest rates for the following quarters will probably see a revision. Interest thus obtained through the insurance is tax-free for the investors. In addition, as per Sec 80C of Income Tax Act, the customers will also get Rs 1.5 lakh as tax rebate. The only downside is its longer lock-in period.
2. Mutual Funds
When it comes to saving money for child’s future, we cannot miss out the option of Mutual Funds. But wait, there are some risks associated with this, of course: it is the uncertainty of market rates and scenario at the time of redemption. Say, you wish to redeem your savings by 2030, the market rates by then are subjected to both appreciation and depreciation. However, there have been a number of equity mutual funds that have offered better returns as compared to bank deposits. For long-term investments with promising sizable returns, mutual funds can be a good choice. This will be of help in securing the education, marriage and other bulky financial needs of your child.
3. Gold investment
Gold investment is always a good option of saving. It is not necessary that you save as physical gold. There are also ETF options which does not include any kind of storage charges or locker fee. Furthermore, e-gold (which is gold in electronic form) is also another option. Month on month, you may save a significant amount for purchasing gold in small amounts.
In fact, among all the forms of investment, gold always gives you with more return on investment. When you decide to make gold investment for longer years like 10 to 15 years, the ROI you enjoy will be more. The only disadvantage here is that the customer will be subjected to pay capital gains tax at the time of selling.
Coming on to physical gold, it is also a good option, especially for those who have a girl child. The downside lies with the possibility of price fall down through years.
4. Sukanya Samriddhi
This is one more additional scheme largely helpful in building your child’s future including education. It is a much sought-after child investment plan among the people. The rate is interest offered is 8.5 percent and the interest remains tax-free. This scheme is applicable only for girl children. Yet again, as per Section 80C of the Income Tax Act, the scheme provides tax benefits. It is importantnt to save money towards the future of girl babies. So, naturally, this scheme is a good go. Saving in this scheme will encompass marriage, education and entire future of your child.
5. Deposits with banks and companies
Considering safety of investment made for your child, it is good that you opt for FDs with banks or companies. There are several companies that offer rate of interest at 8.25 percent when deposited for 10+ years. Considering bank deposits, the rate of interest is often at the range 6 to 7 percent. With the company deposits, the disadvantage is that they offer lesser tenure of maximum of 5 years whereas the same with banks is 10 years or even more.
6. Debt Mutual Funds
As compared to bank deposits, a few debt mutual funds in fact give better returns and are also highly tax efficient. The only challenge here is to identify the best child plans. In case you are looking for very long term investment schemes along with lump sum returns, debt mutual funds can be your choice. As far as security aspects are concerned, in debt mutual funds, you should choose the ones with AAA securities as the give you respite even at times of market fall.
The verdict
Of all the plans, the ideal ones recommended will be PPF and Sukanya Samridhi as they provide the best rate of interest and makes your investment tax-free. Ideally, check out all the different aspects of an investment plan before deciding the best for your child. In case you want to save for long term for about 15 years, the best choice will be PPF. In case you want smaller portions of investment for about 10 years, bank deposits or company deposits will be suitable. You should importantly consider the tax liability pertaining to the investment scheme. There will be no tax liability towards a few schemes – check them out ahead of investing. Remember that it is not very easy to get out of an investment scheme at any time in between. So it is good that you decide the best right at the beginning.
