As a parent, it is natural for you to think and plan for your child’s future, especially paying attention to educational needs. With rising cost of education and accounting for inflation, setting aside substantial funds so that your child gets the best education irrespective of the field he/she wants to pursue becomes imperative. Thus, you will need the right monetary strategy to help you do this without relying completely on debt.
Here is the list of top investment options that you can choose to help finance your child’s education.
- Fixed deposit
You can invest your savings in high-yielding investment instruments like fixed deposit to cater to your child’s educational expenses. Fixed deposits are considered as the safest investment for child. This is because you can earn guaranteed returns on your FD. The interest earned does not fluctuate based on market movements, so you can predict the maturity sum in advance. To increase your interest earnings, you can invest in Bajaj Finance Fixed Deposit and earn interest up to 8.75%, as a regular investor on a cumulative FD for at least 36 months or as a senior citizen earn interest up to 9.10% on the same FD. Moreover, you can streamline your financial plan with the Bajaj Finance FD calculator. Then ladder your FDs by investing in both cumulative and non-cumulative FDs for varied tenors so that you can use the maturing amount to fund your child’s varied education needs at different stages hassle-free!
- Gold ETFs
To manage your child’s higher education costs, you can invest in gold ETFs, which are comparable to one gram of gold. In order to undertake an investment in gold ETFs, you just have to open a DEMAT account and then invest exactly in the same manner as you would have done for mutual funds. Here instead of buying units in stocks, you or your fund manager will buy gold units in paper form. ETFs offer better liquidity as compared to gold in physical form. This is because you can sell your units anytime you want or when the market looks favourable and offers higher price for your units. Unlike gold’s purity and time bound value decrease, gold ETFs will yield the exact market value prevailing at the time of you sell.
- Sukanya Samriddhi Yojana (SSY)
To support the wellbeing and freedom of the girl child under the ‘Beti bachao, beti padao’ campaign, the Indian government in 2015 launched the Sukanya Samriddhi Yojana (SSY). You can open an account under SSY for two of your daughters before they attain the age of 10 years. SSY accounts come with a long maturity tenor of up to 21 years, where you will have to pay at least Rs.250 or a maximum of Rs.1.5 lakh every year for 15 years. Starting from the 15th year and until maturity, you do not have to invest anything at all. Your existing investment fetches interest during this time. As per the SSY guidelines, interest rates are altered every quarter, which for the present quarter ending December, 2018 has been fixed at 8.10%. Your investment and interest earnings for SSY enjoy an EEE status. This means you can claim both your investment and interest returns every year up to a 100% as tax exemption under Section 80C of the Income Tax Act. Moreover, you can partially withdrawal up to 50% of your investment after 5 years of account opening or when your daughter turns 18.
- Public Provident Fund
Public Provident Fund or PPF is a long-term investment plan that comes with a minimum maturity tenor of 15 years, which you can extend for another 5 years if needed. Unlike EPF or Employees Provident Fund, any individual earning a regular income can open a PPF account in a local bank or post office branch. To start a PPF, you can deposit a sum as low as Rs.500. The only condition for PPF is that you must invest a minimum of Rs.500 or a maximum of Rs.1.5 lakh in your account once every year. Your Provident Fund (PF) investment is capable of fetching you a high interest return of up to 8% at present. Moreover, you can claim 100% tax exemptions of up to Rs.1.5 lakh every financial year under Section 80 C of the Income Tax Act basis your investment and interest earnings for PPF. What’s more, you can utilise the risk-free, high maturity amount of your PPF to cover the overseas educational expenses for your child.
Keep these investment options in mind and then weigh your risk-taking capacity to choose the right mix for your portfolio. Before investing in any financial instrument, you must compare terms of liquidity, return assurance, and maturity conditions thoroughly.