While investing, one of the major objective is the return. Higher the assured return and lesser the risk, higher is the likelihood of investor to choose the product. And when it comes to a child, primary objective for investment is education and marriage. So that by the time you enter into retirement, there is no financial trouble to arrange money for the same. And in order to meet this objective, long term planning plays a very important role. This is the reason why it is recommended to start investing immediately after a child is born this is because the corpus is bigger when you start early. Apart from returns, you should also consider expenses such as healthcare, clothings, food, etc.

Listed below are the investment schemes especially for child categorized as zero risk and decent return and high risk and high returns:

Zero Risk, Guaranteed Returns:

Sukanya Samriddhi Yojana: Made especially for girl child, this investment option is considered to be the best in the industry giving a return of 9.2% compared to PPF. Long term returns are excellent and if you invest Rs. 30,000 per year (i.e. total Rs. 4, 20, 000 for 14 years) then maturity amount will be Rs. 15, 781, 53 which girl will receive after 21 years which can be used either for education or marriage. Moreover investment and returns are fully exempt from tax. Since the returns are fixed depending on the invested amount, it is considered to be the safest investment. Here are the detailed articles on maturity amount calculation for SSY and its various benefits and eligibility criteria.

Child Insurance plans: This is a must to have product in every parent’s portfolio. Its main objective is to provide lump sum amount in an event of death of the policy holder and moreover the policy continues to be active and child keeps getting money at intervals specified according to the terms and conditions of plan. And in case of the death of the policy holder before the policy expires, the burden of paying the future premiums passes on to insurance company and neither the child nor any other person from the family should be worried of making premium payment. And for low to medium income earning parents, there is also an option to pay the premium annually, half yearly or quarterly. Such plans also enforce the parents to save regularly in order to make payment every year. Few such plans are available in the market by most of the companies’ viz. LIC, HDFC Life, Max Life, Shriram Life, Birla Sun Life, and others.

Savings Account: Various banks in India viz. SBI, Kotak, ICICI, Axis Bank, YES Bank and others allows opening of savings account for kids. However each of these bank has minimum age limit and can be operated jointly with parents or guardian. For e.g. ICICI bank young stars account can be opened for children in the age group of 1 day – 18 years. Certain banks offer benefits in the form of free education insurance cover to a certain limit in the event of the death of the parent or guardian. For securing the future, once account reaches certain limit, there is also an option of transferring small amount to a fixed deposit. This is offered by HDFC Kid’s advantage account. But before opening the account; make sure there is no minimum balance required or choose the one with very small balance, there is an auto transfer facility from parent’s account to child’s account, offers insurance cover, provides higher interest.

Fixed Deposits: This fits into the bracket for safe investment product and helps in safeguarding kid’s future. But specialized schemes for kids are offered by various banks in India. Few of these schemes are:

• PNB Balika Shiksha Scheme – Especially for girl child
• PMC Bank – Bal Bhavishya Yojana
• Allahabad Bank – Sishu Mangal Deposit Scheme

Minimum amount required is small in these schemes compared to normal FD account. Through banks such as Canara bank, HDFC bank, and Bank of India, parents can open fixed deposit account for their children ensuring financial protection.

Recurring Deposits: In order to meet the increasing education and marriage cost, RD account is another option requiring small amount to be deposited every month. If you extend the tenure, then banks will offer additional benefits. For e.g. TMB bank gives priority to the RD account customers who make saving for longer duration and request for education loan are done on priority.

High Risk, High Return:

Equities: One of the golden mantra which every financial advisor to gain maximum returns from share market is to invest for a long term. Longer the tenure, bigger would be returns. However, stock market is most risky since it is dependent on various factors which are not in anyone’s control such as climate, economy etc.

Mutual funds for children: There are many MF for child education in the market which has given excellent returns compared to traditional investment products recommended by parents such as provident fund, fixed deposits, savings account and others.

However listed below mutual funds have given returns of more than 16% since their start date:

• Birla Sun Life Frontline Equity
• UTI-Opportunities Fund
• IDFC Premier Equity Fund
• SBI Emerging Businesses Fund
• ICICI Prudential Value Discovery Fund
• HDFC Mid-Cap Opportunities Fund
• Reliance Small Cap Fund
• Reliance Banking Fund
• HDFC Prudence Fund

There are funds especially designed for children:

• HDFC Children’s Gift Fund-Investment Plan
• ICICI Prudential Child Care Plan-Gift Plan
• ICICI Prudential Child Care Plan-Study Plan

The above listed 3 funds have given returns of more than 13% which proves that, they outshine traditional plans. So it is worth recommended to atleast invest in two MF products from each of the above listed categories and secure your child’s future. Although MF carry risks as they are dependent on various factors such as economy, rainfall and many others, in the long run they have proven to be the best. However be noted that a good past performance does not assure similar returns in the future.

So if you still feel confused which investment product to choose for child’s future then take help of financial advisor.