How To Start Investing For Your New Born Child

Life is very uncertain these days, that is why it is important that you make plans in advance to secure the future of your child at the earliest. Many people do not understand the importance of investing for child’s future requirements including higher education, wedding, and career as they keep waiting for the right time. They realise when it is too late. A person should invest as early as possible without any delay.

Many investment options and child plans are present that help to meet the various requirements of your child. You should make the investment decision wisely after considering various important factors. You should do a lot of research before selecting a child plan so that you can select the best child plan as per your affordability and requirement.

The investment or purchase decision should not be made in hurry otherwise it can lead to the selection of wrong child plan or investment option. The best child plan is one which is available at a low price and offers. The best child plan is one which has various benefits to offer at an affordable price. You should not buy a child plan in hurry. Take your time, do a lot of research, compare various plans and then select the best child plan. You should also refer to various reviews and ratings available online before buying a child plan.

When a baby is born, he or she receives many gifts in cash from relatives as a token of love. Instead of depositing this money in a bank account or keeping it aside, it is better that you invest this amount in long-term investment options. Long-term investments are made to meet the future requirements including higher education, wedding, and career. There are various short-term requirements also such as first birthday party, admission in a reputed school, and more. A person can invest in short-term as well as long-term investment options to provide for the needs of their new born. You can invest in an investment option or buy a child plan to meet the future needs. You can select the best investment plan or child plan via online medium.

Check out various investment options suitable for your new born child:

  • Fixed deposit: This financial instrument is provided by non-banking financial companies (NBFCs) or banks. It is safe to invest in fixed deposits as they have fixed interest rate for the entire period. But the returns are low and the interest income is fully taxable. If you want to invest for a short period then it is a good investment option. Since the interest rate is low and interest income is fully taxable so it is not suitable for long-term goals. The interest rate for fixed deposit is 7.4% per annum.
  • Recurring deposit: Recurring deposit is offered by the banks. It is also a safe investment option as it promises guaranteed returns. There is no limit on investment. But the return rate is low and the interest rate is fully taxable alike fixed deposits. The term for recurring deposits ranges between 6 months – 10 years in case of all major banks in India. The interest rate does not change once it is determined for the tenure. Reserve bank of India ensures that guidelines are followed by various banks. The interest rate for recurring deposit is 6.5% per annum.
  • Public provident fund: The public provident fund is one of the major investment options. It is a saving-cum-tax saving scheme in India by the government of India. The interest rate for PPF is 7.6% per annum. The initial deposit or investment is Rs. 100. Joint accounts are not allowed in PPF scheme. As per section 80C of the Income Tax Act, you are eligible to get tax exemption on the amount deposited. Cash, cheque, DD, PO, and online funds transfer are the various modes of deposits.
  • Sukanya samridhi scheme: This scheme is a part of the ‘Beti Bachao Beti Padhao’ campaign. It is small deposit scheme for a girl child. The interest rate for Sukanya samridhi scheme is 8.1% per annum. It is a good investment option for long-term. You can get your account opened at any post office or authorised branches of commercial banks. An initial amount of Rs. 1000 is required to open the account. It is only for those girls who are below the age of 9 years.
  • Traditional insurance plans: Traditional insurance plans include term plans, endowment plans, and whole life policies. The multiple benefits of traditional insurance plans are return, safety, and risk cover. Traditional insurance policies do not involve risk as fixed returns are provided either in case of premature death or at the time of maturity. The interest rate of traditional insurance plans is between 5% – 6%.
  • Unit linked insurance plan (ULIP): Unit linked insurance plan (ULIP) is a product provided by the insurance company. There are dual benefits of unit linked insurance plans including investment and insurance. The interest rate of unit linked insurance plan is 10.1% for 5 years. PNB MetLife Smart Platinum, SBI Life Wealth Assure, ICICI Pru Wealth Builder II, and LIC Market Plus-I Growth Fund are some of the best unit linked insurance plans. As per section 80C, section 80D, and section 10(10D) of Income Tax Act, you are eligible to receive various tax benefits.
  • Equity linked savings scheme (ELSS): The interest rate of equity linked savings scheme is 18.8% for 5 years. It is a good investment option as you get various tax benefits and high returns. These are tax saving mutual funds in which majority of the amount is invested in equity schemes. The lock-in period for ELSS is 3 years. As per section 80C of Income Tax Act, you are eligible to receive some tax benefits for investing in ELSS.
  • Hybrid funds: The interest rate of hybrid funds is 15.9% for 5 years. It is a good investment option as it provides high returns and high liquidity. In hybrid funds, the investment is made into two or more asset classes. The amount is invested in stocks and bonds. They may also be called as asset allocation funds.
  • Real estate: The interest rate of real estate is 13.4% for 8 years. This sector is growing at the fastest rate. If you are planning to buy a plot or flat then it is one of your best decisions. The risk involved with real estate investment is quite low and the rate of the realty increases within the time period of 6 months.
  • Gold: The interest rate of gold is 2.6% for 5 years. Gold is one of the best investment options as the value of gold increases very soon. If you want to invest in gold then you can opt for any gold investment format including gold ETF, gold deposit scheme, gold mutual fund, and gold bar. It is beneficial to invest in gold for a short period.

Conclusion:

Buying a child plan is also a good decision. Many insurance companies are offering child plans for fulfilling all the short-term and long-term requirements. You should do a lot of research before selecting any child plan so that you can select the best one. These days, you can easily buy a child plan via online medium. You can also compare various plans with the help of the premium calculator in order to select the best child plan. Many people do not understand the value of a child plan and they realise it when it is too late. The best child plan is not one which is cheap but it is one which has various benefits at an affordable price. You should never buy a child plan in hurry. It is important that you do a lot of research and comparison before buying a child plan. You should buy a child plan from a reputed insurance company which has high claim settlement ratio. You should check the online reviews and ratings before buying any child plan.

You should plan an investment even before your child arrives so that you do not have to rush for a loan. There is no profit of keeping money idle in a bank account so it is better to decide some amount and start investing it some investment options so that you can secure the future of your new born. The long-term requirements for which the money is invested for the child include higher education and wedding. An investment is a major decision so it should be made wisely after considering various important factors and doing a lot of research. Online medium is of great help as it provides information about various investment options. Many short-term and long-term investment options are present in the market.

Fixed deposit is a financial instrument provided by non-banking financial companies (NBFCs) or banks. It is a good investment option if you want to invest for a short period. It is not suitable for long-term goals as the interest rate is low and interest income is fully taxable. Recurring deposit is a safe investment option offered by the banks. The demerit of recurring deposit is that the return rate is low and the interest rate is fully taxable. The public provident fund is one of the best investment options. PPF interest rate is 7.6% per annum. According to section 80C of the Income Tax Act, you are eligible to receive tax exemption on the amount deposited in PPF. The various modes of deposits are cash, cheque, DD, PO, and online funds transfer.

Sukanya samridhi scheme is a part of the ‘Beti Bachao Beti Padhao’ campaign. This scheme is for those girls who are below the age of 9 years. You can open your account with Rs. 1000. Traditional insurance plans include term plans, endowment plans, and whole life policies. The best part about traditional insurance plans is that they do not involve risk. Unit linked insurance plan (ULIP) is a product from the insurance company. Investment and insurance are the dual benefits of unit linked insurance plans. According to 80C, section 80D, and section 10(10D) of Income Tax Act, you are eligible to receive various tax benefits for investing in ULIP.

Equity linked savings scheme is a good investment option as you get various tax benefits and high returns. Hybrid funds are also known as asset allocation funds. In asset allocation funds, the investment is made into two or more asset classes. Real estate sector is growing at the fastest rate. The price of real estate increases within the time period of 6 months. The risk involved with realty is quite low. Gold is also a good investment option as the value of gold increases very quickly. Gold ETF, gold deposit scheme, gold mutual fund, and gold bar are some of the gold investment formats.

If you are looking for the answers to various questions including:

  • What are various investment options available for new born child to meet short-term and long-term requirements?
  • What is a fixed deposit?
  • What is recurring deposit?
  • What is sukanya samridhi scheme?
  • What are traditional insurance plans?
  • What is a unit linked insurance plan?
  • What is equity linked savings scheme?
  • What is a hybrid fund?
  • Is it a good decision to invest in real estate?
  • Is it worth to invest in real estate?

Then you are at the right place, please refer to the above-mentioned information in order to get answers to all your questions.