It is upto parents to decide on where and how to invest to reach the specified goal of child education. Before investing one should be sure of the amount needed for your child's education and a number of years required.
Here we have provided few investment options which can be considered as is always better to allocate your asset in different sectors to mitigate risk. The combination of investment should be such that, it should provide higher returns with low risk.
1) Mutual funds SIP
Investing in mutual funds through SIP will help you create required wealth for your children. This disciplined investing of regular amounts in different sectors will help to balance your portfolio.
2) Equity Mutual funds
If you are a young investor and have enough time for childs education, then one can look at investing in equity mutual funds which have not failed to generate returns in long term. Last 3 year returns from some mutual funds has averaged more than 15 per cent.
Public Provident Fund can be one of the safe investment avenues for your kids future. There are many advantages and benefits such as it falls under 80C of Income Tax Act.
Investment in PPF is eligible for EEE (Exempt, Exempt, Exempt). The investment period is 15 years and the returns are tax free.
4) Insurance cover
There are many policy providers who will take care of children's future expenses in an unforeseen event. Many insurance policies provide money to you or your child when they are in the age group of 18-26 years. However, returns from these have always been low.
5) Sukanya Samriddhi Account
The best option would be the Sukanya Samriddhi Account if you have a girl child. The scheme qualifies for tax rebate under Sec 80C of the Income Tax Act. Income is tax free and the interest rates are way higher than bank deposits or most other post office schemes.
6) Children Funds
There are many mutual fund houses have their own funds for children plan. Such as HDFC Children's -Gift Fund, Templeton India Children Asset - Gift plan, ICICI Pru Child Care-Gift Plan. However, the good thing here is the insurance, but the returns are poor.
7) Long term bank deposits
If you have lumpum to invest, you can consider a 10-year bank deposit. If you do not have lumpsum, please go for a recurring bank deposit. The one drawback is that the interest income is taxable.