Investing for your child’s future is one of the best gifts you can give them. With proper planning and investments started early, you can ensure your child has enough funds for important life goals like higher education, buying a house, starting a business, or even building savings for retirement. In 2024, there are several good investment options for children in India that offer attractive returns along with tax and other benefits. Here is an overview of the best child investment plans that you should consider investing in this year.
- Child education plans
Child education plans offered by insurance companies are one of the most popular investments specifically aimed at building a corpus for your child’s school and college education needs. These plans also offer tax benefits under Section 80C on premiums up to Rs 1.5 lakh per year.
Benefits
– Disciplined investing for a pre-defined goal
– Guaranteed returns to beat inflation and fund increasing education costs
– Tax savings on premiums to reduce cost of investment
– Maturity benefits are tax-free under Section 10(10D)
– Protection with life cover in case of demise of parent
When choosing a child education plan, look for ones with good ratings, higher guaranteed returns, and flexibility of premium payment.
- Child ULIPs
Unit-linked insurance plans (ULIPs) are market-linked investment plans offered by insurance companies. Here are the benefits of investing in child ULIPs.
Benefits
– Equity exposure to gain from stock market growth
– Fund switching and premium redirection flexibility
– Liquidity through partial withdrawals
– Life cover for parent and waiver of premium on parental disability
– Tax benefit on premiums and maturity proceeds
When selecting a child ULIP, choose one with low charges, good fund options, and flexibility.
- Equity mutual funds
Investing in equity mutual funds through systematic investment plans (SIPs) is an excellent way to build a retirement corpus for your child.
Benefits
– Power of compounding over long tenure
– Rupee cost averaging through SIPs
– Exposure to growth potential of stocks
– Flexibility of investment tenures, amounts, and funds
– Liquidity as compared to traditional plans
– Tax efficiency of equity funds
For child investments, choose equity funds with a good long-term track record, low expenses, and stability.
- Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana is a government-backed savings scheme focused on female children.
Benefits
– Higher interest rate
– Triple benefits – savings, interest income, and tax rebate u/s 80C
– Tax free maturity proceeds
– Partial withdrawals allowed after age of 18 years for higher education
– Account can be opened any time before the girl child turns 10
This savings scheme is considered to be one of the best tax-saving fixed income options.
- Child savings bank accounts
Child savings accounts allow you to invest lumpsum amounts as well as set up recurring deposits for your child.
Benefits
– Flexible investments with no lock-in
– Easy liquidity through withdrawals and transfers
– Debit card provides access to the child after a certain age
– Interest income from the savings account and fixed deposits
– Minimal documentation and quick account opening process
Make sure to choose a bank that provides a decent savings account interest rate and good FD rates for child accounts.
Conclusion
Consider the pros and cons of various investment options before investing based on your risk appetite, return requirement, and liquidity needs. A mix of equity and debt mutual funds, child education plans and government schemes can create a well-balanced child investment portfolio. Using a child education plan calculator helps you plan the investment amount more accurately while factoring in inflation, interest compounding, and other variables.
