Saving for Your Child: When is the Right Time to Invest?
A child plan is necessary to ensure educational, character, and career growth. But people have a confusion about the right time to invest in a child education plan. The cause of this confusion of the abundant child plans available and the different return rates for different investment durations. Here, you will know everything about saving money for your child, the best time to invest, and the remedies if you miss the window for a perfect investment.
How to Save Money for Your Child
People often choose a child plan based on their financial preferences and capacity. Even if some plans can provide a higher return, some will stick to orthodox investment plans for the safety of the invested capital. But sticking to conservative ideologies in investment decisions can be unproductive and lower returns. If you wish to make a fruitful investment for your child, you must know the benefits of each child education plan. For this purpose, you can divide the plans into the below-given two categories to specifically understand the plan’s returns.
- Child Education Insurance Plan
- Sukanya Samriddhi Yojana
- Post Office Savings Schemes for Minors
- Bank Savings Accounts for Minors
Conventional Savings Plans Used as Child Plans
- Life Insurance
- Banking Plans
- Provident And Pension Funds
- Fixed Deposits
- Gold / Sovereign Bonds
The Best Time to Start Saving for Your Child
From studies and expert advice, it is clear that the best time to start saving for your child is between childbirth and five years.
The major reason for this early age to start an investment is the longer plan duration. And for a child at this small age, you can easily invest in a child education plan for 15 or 20 years. Any investment plans will have a higher return with such a long duration. Another reason for early investment is that with a longer duration, you only have to set aside a small portion for investing into the child education plan. So, you can invest in your child’s future without disrupting the finances of your present life.
What if You Missed Your Window to Start a Child Plan?
What to do if your child is older than five or almost reaching the age that requires higher education or similarly costlier aides? Then don’t worry, as you can take benefit of several plans that are apt for different age groups and investment durations. But a thing to consider for investments for short durations is that you will need to invest in a plan with a much higher return rate. And stylishster such plans with a small investment duration and high returns always have high risks associated with them.
Different Child Plans Optimum for Children in Different Age Groups
Below is the list of plans suitable for children in each age group. The listing of these plans is as per the duration between plan commencement and maturity. As you can see, the risks will increase with your child’s age. So, it is always necessary to invest in a child plan as soon as possible to avoid risks of returns and invested capital.
5 To 10 Years – Savings Accounts
Savings accounts in banks or post offices are among the best methods to invest in your child when they are between 5 to 10 years old. The annual savings bank interest rate is around 6% which is much higher than the inflation rate. So over 10 or 15 years, you can easily create an adequate fund for them.
10 To 15 Years – Fixed or Recurring Deposits
Fixed deposits can provide more than a 6% annual interest rate for children and for long durations such as 5 or 10 years. Recurring deposits also have similar interest rates and allow multiple payments rather than a one-time payment.
15 to 20 Years – Market Securities Investments
When your child is less than 5 years close to requiring money for educational and personal expenses, you will require a high-return-high-risk plan. For this market, securities such as equity, mutual funds, bonds, etc., are a perfect choice. You can also invest in ULIP plans, with the double benefit of market investment and life insurance.
Now you know the right time to save for your child and what to do when you miss the opportunity to do so. But a savings plan that can provide high returns with capital protection for any duration is life insurance.