This Children’s Day gift your child a secured future with Financial Planning.

A child brings lots of joy and happiness in the family. The moment we become parents it gives a feeling of being complete but at the same time we also know that it comes with lot of responsibilities. One of such responsibility is to secure the future of your child.

Let’s understand what all saving options we have as a parent:

Savings products are divided into two main categories: Guaranteed and Non-Guaranteed investments:

  1. Guaranteed Funds – As the name suggest, these are the safest options to invest as the principal and returns remains safe. It is most popular and traditional way of investment as we know the value at maturity. However, it is important to know that these products cannot beat inflation. It should be used specially in case of immediate or short term goals. Having said this, it is important to note that some of the funds which comes with long term lock-in period can be used for mid-term or long term goals.  These Financial products are :
  1. Saving Account 
  2. Fixed Deposits 
  3. 5 Years Fixed Deposit Scheme (With Lock-in Period) 
  4. Recurring Deposits
  5. National Savings Certificate 
  6. Sukanya Samridhi Yojana 
  7. Post Office Monthly Saving Scheme 
  8. PPF
  1. Non-Guaranteed Funds – As the name suggest, here your principal and interest both are at risk. But as we say High risk comes with high returns. If you have a longer investment horizon, you may be inclined to take a risk and invest more in equity and other instruments , which are subject to market volatility and have the potential to generate higher returns. Remember Non-Guaranteed funds has the potential to beat the inflation.  Some of the Non-Guaranteed funds are :
  1. Term Insurance / ULIP
  2. Mutual Funds (Equity/Debt/Hybrid)
  3. Gold Saving Plans by Leading Jewellery Houses or Physical Gold / Metal
  4. Real Estate

Now when you know this it is important to remember few things before investing:

  1. Understand how efficiently the product in which you are investing beat the inflation. If not, then every year it will bring down the real value of the money.
  2. While investing for education keep in mind that General consumer inflation has been growing at 6%, whereas the Education Inflation has been growing by the factor of 2 i.e. somewhat around 12% on an annual basis. Here, such Guaranteed instruments will not give justice.
  3. Choose Hybrid or Equity funds over Child specific Mutual Funds. You will get a wider range of products.
  4. You can use your Saving accounts, FD, RD and short-term debt funds for immediate or short term goals
  5. You can use mix of Equity Mutual Funds, Hybrid Mutual Funds, Gold, Sukanya Samridhi, PPF for long term goals. 
  6. Invest in Equity for Long Terms goal. 
  7. For short term goals you can go with Guaranteed funds
  8. Never invest lumpsum amount infact pay in small.
  9. Understand that no single investment avenue can take care of your child future needs. So, it’s important to have goals and segregate them into short term and long term goal. It will be good to further, break your goals to tenure so that, you can be clear that which kind of asset class is likely to work best in which goal. 

Being a Financial Planning Coach, I would suggest to Create a portfolio with diverse asset classes. You can have a combo of Guaranteed and Non-Guaranteed Financial Instruments and review it frequently.

Writer : Dr. Mamta Godiyal 

Please Note : Investment strategies can vary from one person to another and one goal to another depending on their financial situations, objectives, and risk tolerance. These are author’s own views. Readers are requested to do thorough research before investing as investment is subject to owner’s risk.)