How much should you set aside for your child's education?
But, before you start looking for the best child investing plan, do some math to figure out how much you'll need to save for your objectives.
For example, assuming a 6% annual inflation rate, an engineering education that costs Rs 5 lakh today will cost roughly Rs 12 lakh in 15 years. Without the effect of inflation, you only need to save Rs 1000 per month for 15 years to accumulate Rs 5 lakh at a rate of 12% yearly growth.
So, assuming a 12% annual growth rate, you'll need to set away roughly Rs 2500 every month to accomplish your target of Rs 12 lakh in 15 years.
Sukanya Samriddhi Yojana (SSY ) :
If you have a girl kid under the age of ten, you can invest in the Sukanya Samriddhi Yojana (SSY). The guidelines of SSY, which is a government programme, allow for the opening of a maximum of two accounts for two girls in a family.
A post office or a bank can open a Sukanya Samriddhi Yojana account. If the involved post office or bank has a core banking facility, one can also make deposits by electronic means, such as e-transfer.
A minimum initial deposit of Rs 250 is required to start an SSY account. After that, you can deposit a minimum of Rs 250 and a maximum of Rs 1.5 lakh in the account each year. When you start an SSY account, you must deposit for the first 15 years, even if the programme is for 21 years. The SSY plan will mature when the child reaches the age of 27 if the youngster is 6 years old.
When a child reaches the age of 18, the rules allow the parent to withdraw for the purpose of the child's marriage. A maximum of 50% of the previous year's account balance may be withdrawn for the purpose of the girl's higher education. The rules also allow for final closure before the age of 21 if the parent files an application for such premature closure for the purpose of her marriage and certifies that the applicant is not under the age of 18 on the date of marriage by an affidavit.
Public Provident Fund (PPF):
Even if you already have a PPF account in your name, you are entitled to open one in your child's name. However, a total of Rs 1.5 lakh (parent plus minor account) can be deposited in them in a single year. Open a PPF child account in your child's name in addition to your own and continue to contribute to both. PPF principal is eligible for a deduction under Section 80C of the Income Tax Act, 1961, up to a maximum of Rs 1.5 lakh every financial year. Tax benefits are available for both self-directed and child-directed accounts.
Mutual Funds:
Young parents may consider investing in equity mutual funds for their children's ambitions that are at least seven years away. Create a core portfolio that includes large-cap and mid-cap funds that typically outperform. A portion of the money could be invested in index funds, but it's vital to establish a separate portfolio for children's objectives and invest until they're roughly three years away.
Gold ETF:
Many parents wish to buy gold to save for their children's dreams. Gold exchange-traded funds are a more cost-effective option to invest in gold (ETF). Gold ETFs are similar to buying MF units in that they represent paper gold. Gold is the underlying asset, and such investments (buying and selling) take place on a stock exchange (NSE or BSE). On a regular basis, one can buy gold for as little as 1 gm and collect gold over time.
Alternatively, the government issues sovereign gold bonds (SGB) on a regular basis, which can be purchased. The SGB has an eight-year maturity period (lock-in ends from the 5th year). A disadvantage of gold ETFs is that they do not generate the additional 2.5 percent per year interest that SGB does.
Fixed & Reccuring Deposit:
The ideal savings strategy that parents may design for their children is to invest little amounts every month in the form of a recurring deposit. A recurrent deposit would provide financial help to parents wishing to ensure a bright future for their children from the time they enter kindergarten until the time they graduate from college. Banks all throughout India provide a variety of recurring deposit programmes aimed mostly at youngsters for various objectives such as school/college education, children's education, marriage, and so on. Depending on their needs, parents can choose from a variety of recurring deposit schemes offered by any bank, ensuring that their child's future is financially secure in every manner.
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