6 Best Children Investment Plans in India
1) Consider Additional Term Insurance Plan and balance savings invest in good investment options :
When I said term insurance plan, I am not saying you should take term insurance plan in your child’s name. This is an additional term insurance plan you should take in your name for protecting your child’s future. E.g. if you think that it would cost Rs 20 Lakhs for your child education in future or for your child marriage in future, you can consider taking Rs 20 Lakhs additional term insurance. For 30 years of age, this would cost you Rs 5,000 per annum. Consider taking it for 20 year period after your child has born so that you can protect your child till his education. Your savings can be invested in a bank FD or mutual funds so that in case of death of parent, additional term insurance would be useful, otherwise, your savings would help in meeting child education or their marriage goals.
2) Invest in mutual funds through SIP
If you want to create good wealth for your child education or marriage in the future, one of the best ways is investing in some of the best performing mutual funds. You can consider investing in large cap funds and balanced funds. If you still believe that mutual funds are high risk even in the long run, try investing in balanced mutual funds. These are low risk funds, comparing to others. Do you know that Rs 1,000 per month invested through SIP in top performing mutual funds @ 13% annualized returns can fetch you to Rs 2.5 Lakhs in 10 years or Rs 5.5 Lakhs in 15 years time frame. This is the power of SIP in mutual funds.
3) Invest through Recurring Deposits (RD)
Another best and low risk option to create children investment plan is to invest in recurring deposits. Since interest rates are at peak now, one can lock recurring deposits at this rate and create the best plan your children. Do you know that if you invest Rs 1,000 per month in recurring deposit, you would get Rs 2 Lakhs after 10 years or Rs 2.8 Lakhs after 15 years (9% interest rate). Just imagine that if you can invest Rs 10,000 per month, what would be the value of your investment.
4) Invest in PPF
Investment in PPF is one of the best way to lock your money for long term of 15 years. PPF account can be opened for 15 years. You can invest Rs 1 Lakh maximum per annum and expect 8.75% interest rate per annum. Do you know that Rs 100,000 invested in PPF per annum can fetch you a lump sum of Rs 31.30 Lakhs at the end of 15 years which is tax free? You can have your child education done in a foreign university J
5) Invest in NSC
This is one of the best proven methods for child education plan. One of my friends has told me this plan. He started investing in NSC certificates (IX issue, maturity at 10 years) every year for Rs 1 Lakh for tax purpose (80C) for 10 years. His expectation is that from 11th year onwards, he should be free from spending money for child education. He would get Rs 2.34 Lakhs per annum from 11th year onwards for 10 years. What an idea, Sir ji?
6) Invest in ULIP Schemes
While I am not in favor of ULIP schemes, if you are a low risk investor and does not believe in stock market dependent investment schemes, you can look for ULIP schemes which has low allocation and less ULIP charges. You can expect 4% to 6% annualized returns from any ULIP schemes. Don’t get into the trap of insurance agents who promise returns higher than bank fixed deposits or returns which they compare with mutual funds and encourage you to invest in it. Investment in ULIP schemes should be your last option among the other child investment plans.