Many parents these days look at the Unit Linked Insurance Plans and the children saving plans that insurance companies and fund houses tend to provide. They do provide insurance and some sort of safety comfort for your child's education, but, the returns are poor. In fact, if you deduct the expense associated with these child's plans your returns are reduced. If you want to secure your child's education, expenses in case of your sudden demise go for a plain vanilla term insurance plan that will take care of everything. Following the insurance you can look at the following options to build a solid corpus for your child's education. Here are a few great child investment saving plans.
This is the best scheme to invest for a number of reasons. It is a 15-year scheme where you can build a corpus for your child's education. The current interest rate of 8.1 per cent by far beats interest rates of banks, which are at 7 per cent. The interest earned is tax free in the hands of the investors. Apart from this you get a tax rebate of upto Rs 1.5 lakhs under Sec 80C of the Income Tax Act. All in all this makes it a very attractive scheme to invest. This is probably one of the best ways to build a child plan corpus.
Sukanya Samriddhi Account
Another good scheme to invest and which can help build a corpus for your child's education and is an excellent child investment plan is the Sukanya Samriddhi Account. Like the Public Provident Fund, this scheme also offers an interest rate of 8.1 per cent and is tax free. There is also a tax benefit offered under Sec 80C of the income tax act. One has to be careful that this scheme is only for the girl child. So, if you have a girl child and plan to save for her marriage or her education, you can go for this scheme.
You can invest in gold for a child of yours. But, do not do it through physical gold. The best option would be the gold ETFs, because there is no locker and other storage charges. Also, you can invest in the electronic form and there is no worry of theft. You can invest small amounts each month and thus build a sizeable one by buying small amounts. Gold has generated much better returns than most asset classes in the more longer term. So, typically a holding period of say 10-15 years could result in decent gains.The disadvantage of course is that you have to pay capital gains tax when you sell.
Equity mutual funds
Equity mutual funds are another place where you can make decent money. These mutual funds have a proven track record when it comes to returns over the long term. For example, many equity mutual funds have beaten returns from even bank deposits and have given sizeable returns. So, if you are a long term investor, these tend to give you returns like no other. If you are planning to save money for your children's education or other such plans, look no further then equity mutual funds.
Debt mutual funds
Some debt mutual funds offer better returns than bank deposits. They are also more tax efficient than bank deposits, which makes them a better choice However, you need to opt for the safe child plans more than anything else. Go for them if you are planning a very long term investment, given the fact that they give better returns in the more long term. Again, you may need some professional advise here, given the fact that some of these schemes could be a little risky.
This should probably be the last of your bets , given the fact that they currently offer very low interest rates. For example, if you invest in them now, you would get just 7 per cent for 10 years. Also, once you invest in the same, and interest rates rise, you have to withdraw them mid-way and place in deposits that would give you a higher rate of returns. This could also mean a loss of your returns, since banks do deduct for pre-mature withdrawal. The other worry is that there is going to be a tax on your deposits and if you are already paying tax it could reduce your tax liability.
The best child plan options would be the Sukanya Samridhi and the PPF. They offer the best interest rate and the interest rates are tax free in the hands of the investors.