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Best Investment Options for Minors

By Admin
09 May 2022, 11:00 PM
best investment options for minors

Becoming parents is counted as one of the biggest blessings. But securing the future of the child in the financial aspect becomes a blessing for the growing child.

As parents, it becomes their duty to ease out the financial difficulties so that it does not hamper the smooth growth of the child. Therefore, it is better to start early planning. Only then, a dependable financial base can be assured for long-term financial health.

With the alarming growth rate of educational and healthcare costs, just by saving money, one cannot develop a strong and dependable financial base. The key is to make safe and secured investment plans for better returns and growth prospects. Expert financial advisors always opine that it is best to begin investing in the child’s name as soon as the baby attains the minimum age of holding an investment in his/her name. It’s better to begin in the first hour so that finance does not take a toll later during the time of need. 

There are multiple types of investment options currently operating in the market that focus on child development. A child investment plan ensures a well-directed and sought-out organised investment plan. There are principally 3 types of child investment plans that may prove to be fruitful: 

1. Sukanya Samriddhi Scheme (SSY)

This particular scheme has been exclusively crafted for those who have a girl child or children. The account matures after 21 years while the total investment period of 15 years. As the insured beneficiary turns 18 and attains adulthood legally, partial withdrawal is allowed for higher educational purposes.

The SSY account can be closed before the completion of the entire term of 21 years if the beneficiary is married off. The maturity proceeds of the scheme are eligible for tax deduction under Section 80C of the Indian Income Tax Act.

2. PPF

This is also a good, safe, and secured method of investment with a term period of 15 years. There are multiple banks that offer the option of opening a PPF account. With an online banking facility, opening a PPF account is just a fingertip away.

The yearly investment for this sort of account ranges from INR 500 to INR 1.5 lakh. A separate PPF account can also be maintained in the name of the minor child, but in that case, the combined limit of all the PPF accounts together must not exceed the annual limit of INR 1.5 lakh. 

3. Mutual Funds

Continuing with a SIP or a Systematic Investment Plan is a commendable way of investment. For wealth accumulation to fulfil future financial goals. Equity mutual funds are best suited. For the higher education or marriage of the children, this sort of fund is the best. If the parents open an MF account in the child’s name, then the mentioned child will be the only holder. Joint account option is not prevalent here. The names of the parents are mentioned as guardians as minors are ineligible to enter any financial contract or deal. As long as the child remains a minor, the account will be maintained by the parents as the custodian of the beneficiary. As the child reaches 18 years of age, this account will automatically cease.

4. Fixed and Recurring Deposit

Guaranteed with a fixed interest rate, this conventional mode of saving possesses negligible risk, which is why low returns comparatively. Moreover, the interest earned is taxable. Therefore, this mode of investment is ideal to fulfil short-term goals.

5. Child Plans

A specifically designed child insurance plan ensures a lump sum amount with a future premium waiver if the policyholder dies. Not only that, the life insurance company will even keep investing on behalf of the policyholder in case the policyholder dies. As per the terms of the policy, at certain intervals, the child receives a certain percentage of money. Such a life insurance plan secures the future of the child despite the absence of the parents or guardian.

6. Stocks and ETFs

Although a risky platform, stock investment has its own perks even. These are highly liquid with higher returns. This is also a noteworthy investment option.

7. Gold ETFs

The gold ETFs are mutual fund units with a value equivalent to a gram of gold. Because of their uniqueness, these are also known as paper gold. With the possibility of higher returns, the risk factor is higher here.

Popularity is not the key to choose or plan any investment avenue. It must solely depend upon the financial needs and goals of the investor. A clear understanding beforehand resolves a lot of issues. Depending on the long-term and short-term financial goals, the investor must organise the investment plannings for a secured financial future of minors.