Today’s parent decide career option of their children’s before their birth. Just like Mr.Qureshi of 3 Idiots who has decided that “My son will be engineer” although Farhan wanted to be wild life photographer. Well nothing wrong in deciding your child’s career but what about money require to fulfill this desire. What about securing financial future of child? Today we will discuss about Investment option for your child’s future.
Which Investment option you prefer for your child?
Given a choice which Investment option you prefer for your child? Despite of numerous Investment options available in market majority of people will opt for low yield Investment Avenue such as fixed deposit or PPF. Very few people will opt for stock market or equity mutual funds. In some of the cases we found that people take insurance plan and become comfortable but believe me if your aspiration is high only insurance plan will not work for your child.
Another fact is that majority of them invest their money without formulating any investment strategy & Future education cost.
Before staring Investment you should make proper investment strategy with time line mentioning how much money is required at every stage of life. Like money required for education at age of 20 year or money required for marriage at age of 25 year etc.
Investment Option for your child
More than 20 types of investment options available in market, you need to pick right option for your need. Remember there is nothing to differentiate the investments made for children from the rest of your portfolio. They are exposed to the same risks, offer the same returns and are taxed at the same rate.
Note:- Return shown against investment option in above chart is indicative, actual return may vary.
How much Investment I should make?
Majority of people fail in deciding how much investment they should make for their child. General observation is people often ignore future cost and make investments based on current cost. Remember as you are planning for your child’s future you must take in to account future cost which will be pretty high compare to current cost. E.g In good old days MBA from IIM was possible in 5 lac but today it is costing 30 Lac+ and it is going to cost more in future.
Note:- Future cost shown above is indicative
So, Which Investment option you prefer for your child? Do share your comments!
Suresh
Good article Raviraj. You have rightly indicated that we need not have seperate investment plan for children, but such financial goal can be part of our overall goal. We just need to invest in mutual funds, stocks, FD’s and include the amounts what we intend to save for our child future education as part of the portfolio. These days several child insurance plans are coming which are waste. They provide you 5% annualised returns whereas you would get 9% if you invest in bank FD’s. Yes you can ensure you take sufficient term insurance plans and invest balance in any other investment option. This is my view.