How to invest for your child's future
| 14 November, 2022 |
Every parent worries about their child’s future. Securing their financial future is vital to ensure they do not face setbacks. This will also ensure that they have backups in case of any health or financial emergency.
Inculcating basic financial literacy early – like teaching the value of money, saving, and giving your child an allowance – will prove beneficial. Initiating the child into the world of investment will also help in decision-making and confidence building.
Diversification in money investment is a key tip for parents. You do not want to divide your money among one or two asset types. As your child grows, so do their needs. Education is the primary priority, but so is healthcare, and then eventually marriage. Diversification is also crucial while investing because you want to avoid bad returns and losses.
Keeping this in mind, there are several ways to invest money for children and their future:
Savings Account: One of the best investing steps for parents is to open a Savings Account for their kids, which allows timely savings starting from a deposit amount of ₹1000. This account gives a child the flexibility to deposit money whenever it’s available. With an HDFC Bank Kid’s Advantage Savings Account, when the balance rises over ₹35,000, an amount of ₹25,000 or more will automatically be put in a Fixed Deposit in the child’s name via the MoneyMaximizer feature. Other features include a free education insurance cover of ₹1 lakh in the case of loss of a parent.
Sukanya Samridhi Account: This is a government savings scheme created keeping the girl child’s financial welfare in mind. This account can be opened with any authorised Indian bank or the India Post branch. You can either complete the activation process at the nearest HDFC Bank branch or use NetBanking as well. The Sukanya Samridhi Account allows an investment starting from ₹250, has a high interest rate of 7.6% and is exempt from tax under Section 80C of the Income Tax Act (1961). The tenure for the maturity amount is 21 years.
Public Provident Fund: Another tool of money investment for parents is the PPF, which has assured long-term returns and great tax benefits. Parents can open a Public Provident Fund Account for their child with HDFC Bank either in-person or using NetBanking. PPF currently offers an interest rate of 7.1% and a tenure of 15 years, which can be extended for 5 more years after maturity. The minimum deposit is ₹500 while the maximum is ₹1,50,000 per annum. A PPF can be transferred from the post office and other banks to HDFC Bank as well.
Mutual Fund: Parents can invest in either equity mutual funds or debt mutual funds depending on short-term and long-term goals. Equity mutual funds require an appetite for risk and a fair amount of knowledge of the markets, and they are recommended for parents whose children are fairly young and the retirement period is at least a decade or two away. Debt mutual funds, on the other hand, are relatively stable, and provide a stable return. You can learn more about Mutual Funds here.
Recurring and Fixed Deposit: Fixed deposits have always been a traditional and safe route of investing. FDs are a great way to invest money for children, as they offer consistent interest rates and guaranteed returns. Recurring Deposits are usually for short-term savings, though investing a small amount for one domain of the child’s life, like education, is helpful.
Get started with an HDFC Bank Fixed Deposittoday, and set your child up for success in the long-term. You can start an FD for as little as ₹5,000. This FD Interest Calculator can help you plan out your returns as well.
Existing customers can book a Fixed Deposit by clicking here. New customers can apply for a Fixed Deposit through their Savings Account, by clicking here.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
