Choosing the right child investment plan is a critical task that calls for careful evaluation. In India, diverse investment plans for children are available, each designed to meet diverse financial goals and risk appetites.
This guide helps provide an understanding of these options so that you are in a position to choose the best investment plans in India to secure and prosper the future of your child.
Why Start Planning Early?
When you start investing while your child is still young, even small monthly contributions can grow into a sizable amount by the time they reach their late teens. This happens mainly because of compounding. Your returns generate further returns over time. If you wait until your child is older, you might need much bigger investments to reach the same target.
For example, let’s say you invest Rs. 5,000 per month in a market-linked plan offering an average return of 8% p.a.
- In 10 years: You accumulate around Rs. 9.45 lakh
- In 15 years: The corpus grows to about Rs. 17.38 lakh
- In 20 years: The investment swells to nearly Rs. 30.86 lakh
Now, compare this to starting at a later stage, say when your child is already 10 years old. You’ll need to invest almost twice as much per month to reach the same goal. That’s why starting early reduces the financial burden while ensuring you build a strong foundation for your child’s future.
Types of Child Investment Plans in India
There’s no single “perfect” plan. Each has unique pros and cons. The trick is to pick the plan (or mix of plans) that best fits your comfort level and your child’s timelines. Here’s a table to help you compare some popular choices:
| Plan Type | Risk Level | Returns | Lock-In | What It’s Good For |
| ULIP for Children | Medium to High | Market-Linked | 5 Years (recommended for 10+ Years) | Life Cover + Potential for High Growth |
| Mutual Fund SIP | Medium to High | Market-Linked | No Fixed Lock-In (exit load may apply) | Long-Term Wealth Creation |
| Fixed Deposit | Low | Fixed | Flexible Tenure | Guaranteed Returns but Lower Growth |
| PPF (Public Provident Fund) | Low | Fixed (Govt. Decided) | 15 Years | Tax-Free Long-Term Savings |
| Sukanya Samriddhi Yojana (For Daughters) | Low | Fixed (Govt. Decided) | Till the Child is 21 Years Old | Targeted Savings for Girl Child |
Looking at this table, you can narrow down options based on your risk appetite, how soon you need the money, and whether you want market-linked or guaranteed returns.
Which is the Best Investment Plan in India?
One of the best investment plans in India is a ULIP, which stands for Unit Linked Insurance Plan. This is a life insurance-cum-investment plan, which means a part of the premium provides for insurance cover while remaining invested in funds (equity or debt or a mix).
It’s different from a pure investment like a mutual fund because you also get life cover. That means if something happens to you, the insurance portion helps secure your child’s future expenses. Also, ULIPs generally allow fund switching, so you can change your portfolio from equity to debt or back again, depending on market conditions or your changing preferences.
Here are a few reasons to consider a ULIP if you want both protection and growth:
- You can choose different funds, from aggressive equity to conservative deb,t based on how much risk you are willing to take.
- With a 10-year time frame, you should see considerable growth, assuming the market performs well.
- Partial withdrawals generally become available after five years, allowing for a certain degree of flexibility in case your child, say, wants a loan earlier.
- ULIPs often come with tax benefits on premiums and maturity proceeds, subject to current laws.
ULIP plans offered by insurers like Axis Max Life Insurance can be a component of a comprehensive financial strategy aimed at securing both your child’s and your family’s future.
Other Key Options
SIPs in mutual funds permit regular investments in equity or debt funds, offering a disciplined means of creating wealth. On the other hand, fixed deposits are stable but may not keep pace with inflation. Programs run by the government, such as PPF (with a lock-in period of 15 years) and Sukanya Samriddhi Yojana (for girls under 10), provide stable and low-risk returns with limited flexibility in some cases.
Conclusion
Deciding on the right plan for your child depends on your comfort with risk, how long you can invest, and what you want from the plan. You might even combine a ULIP for market participation and life cover with safer avenues like PPF or a fixed deposit for stability.
Premium insurance providers like Axis Max Life Insurance have come out with full-fledged ULIPs dedicated to the young ones, which allow for both financial protection and wealth creation. The strategies allow for fund switching, offer tax benefits, and feature an in-built safety net for the child in case of unforeseen circumstances.
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Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.
Standard T&C apply
Tax benefit is subject to change as per prevalent tax laws.
The information presented is not meant to be a substitute for professional advice. Any suggestions mentioned should be considered for general use only. For expert guidance on any issue or procedure, please consult a certified professional.
