With the growing cost of higher education in India, parents need to plan a way for financial necessities to make sure their children can pursue their desired career path in the future. Moreover, while Unit Linked Insurance Plans can be considered a proposed solution, they don’t offer adequate returns to help you with your future.
According to several credible sources, the typical fees charged by B-schools have raised 400% more in recent years. Moreover, with an annual growth rate of 20%, an aspiring student needs to have at least a sum of 95 lakhs by the end of 2025, which is certainly a staggeringly high amount, concerning the middle-class population in India.
Therefore, if you want to make sure that your child’s education expenses are covered properly, a child savings plan certainly fits the bill for you. However, with several options available in the market, it can be quite intimidating to choose a particular plan. So, let’s have a look at some of the best saving plans that allow you to collect an adequate amount of corpus for your child’s fledging future:
1. Sukanya Samriddhi Account
If you’re planning for successful academics for your daughter, it’s high time to invest in the small savings scheme named Sukanya Samriddhi Account by the Government of India. The scheme can be easily instated at every major post office and bank located in your area. Moreover, while you invest in this scheme, you need to make sure that child is nine years old, as it’s a mandatory factor.
This child plan involves a lock-in period of 21 years, during which you cannot withdraw even a single penny from your funds. However, after a certain period, you may become eligible for withdrawal under specific terms and conditions. It’s an extremely reliable low-risk and low-return plan available in India for the betterment of your child.
2. Hybrid Mutual Funds
If you even know about the basics of investments, you may already know about hybrid mutual funds. However, there’s a high chance that you surely don’t know how it helps in ensuring a bright future for your child. Hybrid mutual funds usually invest up to 65% of your premiums in debt and equity instruments and possess lesser risk in comparison to other equity-based mutual funds.
With these plans, you can choose from a systematic and lump sum investment plan according to your requirements and financial capabilities. Moreover, if you choose to invest every month using SIP, you can even gain stable returns while evading the volatility of the stock market. If you’re a moderate-to high-risk investor, this is an ideal option for your child’s educational needs.
3. Public Provident Fund
With the assurance of investment and interest from the authorities of the Indian Government, the public provident fund, abbreviated as PPF, is another safe and reliable investment option for the future betterment of your children. Similar to Sukanya Samriddhi Account, this investment plan can also be availed from your nearest bank or post office.
It also has a lock-in period of fifteen years that makes you unable to withdraw any funds for the time being, and you can avail of partial withdrawal after a certain period, depending on a variety of terms and conditions. All in all, it’s a fairly low-risk investment option with an income tax eligibility exemption of INR 1.5 lakhs.
4. Bank Recurring Deposits and Liquid Mutual Funds
There are a lot of parents who have short-term financial goals for their child, such as marriage. These small and crucial monetary needs can be easily supplemented with the help of bank recurring deposits and liquid mutual funds. The latter involves high liquidity and can be sold off quickly to gain returns in a matter of a single working day.
With liquid mutual funds, you can expect an annual return rate of 6 – 8%. If you already have a supple amount of money, and you need a little bit of additional help to pay your child’s education fees in a couple of months, investing in liquid mutual funds is a great opportunity for you. In case you’re worried about the risk associated with it, you can choose a recurring deposit instead.
5. SBI Life Smart Scholar Plan
Being a non-participating Unit-Linked Insurance plan, the SBI Life Smart Scholar offers a dual layer of protection for your children and dependents. Along with the assurance of basic sum payment, this child savings plan also offers a guarantee of policy continuation through an integrated withdrawal indemnity. The investment plan offers two major benefits namely insurance and market-related rent.
To make an entry into this investment, you need to be less than seventeen years old. However, the bank hasn’t specified any minimum age bar, which means you can choose to invest in this plan right after your child is born. Furthermore, the plan is also eligible for tax deduction under the Income Tax Act’s Section 80C.
6. Large Cap Mutual Funds
As the name suggests, the large-cap mutual funds invest your premium in larger-cap stocks available in India. After the reclassification by SEBI, a lot of fund managers began focusing on large-cap stocks and deserted the small-cap and mid-cap ones, which led to the growth of this plan in the financial market. The plan allows you to invest in two major options i.e., lumpsum and SIP.
In case you want to invest using the lump-sum model, you should first invest in debt or liquid funds and then shift to a larger cap fund with a systematic transfer plan for at least half a year. This will allow you to prevent investing when the market is volatile and ensures stable as well as consistent returns on your investments
The Takeaway
In a country like India, parents are majorly concerned about their child’s marriage and education. With the child savings plans listed above, you can certainly make sure that you provide the best education to your children and assist them in their career trek, without worrying about your financial limitations.