SAVINGS FOR YOUR KIDS
Unit Linked Insurance Plans and Children Saving Plans are popular options for parents nowadays. They do give some protection for your child’s education, but the returns are low. In fact, deducting these child-related expenses reduces your returns. If you wish to cover your child’s schooling and other expenses in the event of your death, a simple term insurance plan would suffice. After the insurance, you can look at the following choices to fund your child’s education. Here are some amazing kid-saving ideas.
PPF
This is the ideal investment plan for several reasons. It is a 15-year plan to save for your child’s education. The current 7.1% interest rate beats the banks’ 5% interest rate. With the RBI set to raise interest rates and bond yields rising, it is expected that the government will follow suit. Investors’ interest is tax-free. You also obtain a tax rebate of up to Rs 1.5 lakhs under Section 80C. The PPF can be extended for a maximum of 15 years in blocks of five years. The PPF account can be kept open with or without future contributions, and the interest will accrue until the account is closed. If PPF account holders wish to continue contributing after maturity, they must file Form H within one year of the maturity date. If the PPF account holder fails to do so, new deposits will not earn interest and would not be eligible for deduction under Section 80C of the Income Tax Act of 1961. Form H is a one-page form that may be obtained from banks’ and India Post’s websites. The account holder must return the completed form to the bank or post office where the account is housed. After the PPF account is extended, the subscriber can make one partial withdrawal every year, but the total withdrawals during the five year extended block period cannot exceed 60% of the account amount at the start of the period. Overall, it is a highly appealing investment concept. Perhaps the greatest technique to develop a kid plan corpus. The longer lock-in period is the sole concern, but it helps establish a corpus. Choose them as they are more tax efficient. The PPF guarantees your safety.
SBI
Smart Scholar SBI:
It is a non-participating ULIP. This plan protects your family twice if you are absent. The base sum is insured, and an integrated premium or withdrawal indemnity ensures the policy’s continuation. This plan has two benefits: market-based rent and insurance. The entry age is 0 and the exit age is 17. The Smart Scholar plan qualifies for the section 80C tax deduction. In addition, a lump sum reward equal to the sum covered or 105 percent of all premiums paid up to the date of death is payable.
SMART CHEMP SBI INSURANCE
Your child’s future educational needs are protected by the SBI Smart Champ Insurance Plan. It provided benefits payable during the policy’s term.
and insures the applicant. He would be covered for life and accidental total permanent disability for the term plan. Also, after the child turns 18, smart benefits are paid in four equal instalments. Again, these plans are prudent insurance plays in case of an emergency.
SUKANYA SAMRIDDHI YOJNA
The Sukanya Samriddhi Account is another effective kid investing plan that can assist develop a corpus for your child’s education. This arrangement pays 7.6% interest and is tax-free. Of course, only females should consider this. There is also an 80C tax benefit. This scheme is only for girls, so be cautious. So, if you have a daughter and want to save for her future, you can use this method. The only concern is lock-in, but you are constructing a sound corpus for a long period. The main issue with this plan is that interest rates may change from time to time. Positively, the given interest rate is much higher than banks. Interest rates may rise again later this month if the administration moves for a revision.
SAVE GOLD
You can buy gold for your child. But not with gold. The gold ETFs are the greatest alternative because there are no storage fees. You can also invest electronically without fear of theft. You can construct a large one by buying modest amounts each month. Longer term, gold has outperformed most asset types. So, normally, 10-15 years of holding could result in decent gains. The drawback is that when you sell, you must pay capital gains tax. However, if you have a daughter and want to get her some jewellery, you might choose for jewellers plans. Gold price declines are still a concern, albeit gold has usually outperformed over time. Mumbai 22 carat gold is now trading for Rs 31,000 Gold prices have declined due to higher interest rates. A long-term gamble at current prices. MUTUAL FUNDS
Everyone loves equities mutual funds to build wealth for kids. But there are risks. The issue is that you never know how the markets will be at the time of redemption. If you wish to redeem all your units in 2030 to help a child, you don’t know if the markets will be booming. However, several stock mutual funds have outperformed even bank deposits. These tend to give long term investors the best profits. Equity mutual funds are ideal for saving money for your children’s education or other goals. The income distributed by equities mutual funds is now taxable, reducing overall returns. So, choose equities mutual funds with care. These are hazardous and there is no guarantee that the markets will be high when you wish to redeem. Consider a riskier child investing strategy.
WHY CHOOSE CHILD INVESTMENT PLANS?
In India, parents are often concerned about their children’s schooling and marriage expenses. Parents will consider how to invest in their children’s future even if they are not present. Preparation helps. Three things to consider while investing in kid plans. The first is safety, followed by returns, and finally the tax implications of such an investment. Of course, the investment’s safety comes first, then the other two. Remember to start investing early and frequently for your child’s future. Last but not least, the Child Investment Plans recommended by mutual funds may not be the greatest because they give low returns. Invest in a solid term plan and then establish a child investing corpus through PPF, Sukanya Samriddhi, etc., which are highly tax efficient. Remember to factor in potential tax liabilities before investing. Finally, safety should be your top focus when making preparations. It’s also worth noting that there are some investments where you can nearly calculate your returns. However, with mutual funds, you are unaware of the returns. We recommend expert advice before investing.
CONCLUSION
The Sukanya Samridhi and the PPF are the greatest child plans. They offer the best interest rates, which are tax-free to investors. Among the several child investing plans we have mentioned, you must choose the ideal one for you. That depends on your saving ability and tenure.