Investment Types for Children

 

There are various investment types suited for children, each with unique benefits and levels of risk.

Below are some of the most common investment types:

1. Systematic Investment Plans (SIPs) in Mutual Funds

-Equity Mutual Funds:

-Balanced Mutual Funds:

Why Choose It: SIPs allow small monthly contributions, making it easier to invest consistently. Over 10-15 years, equity funds can deliver returns of around 10-12%.

2. Children-Specific Mutual Funds

• Many asset management companies (AMCs) offer mutual funds specifically designed for children's future needs. These funds invest in a combination of equities and debt instruments with the goal of long-term capital appreciation.

Why Choose It: These funds are structured to cater to financial goals like education or marriage and have lock-in periods to ensure long-term growth

3. Public Provident Fund (PPF)

       A long-term, government-backed savings scheme with a 15-year maturity period, offering tax benefits under Section 80C of the Indian Income Tax Act.

       The interest rate is revised quarterly, but it is generally in the 7-8% range.

Why Choose It: PPF is a safe investment option with guaranteed returns. It is ideal for conservative investors who want to build a secure corpus for their child's future.

4. Sukanya Samriddhi Yojana (SSY)

       A government savings scheme specifically for the girl child. It offers an attractive interest rate (currently around 7.6%) and comes with tax benefits.

       You can invest up to ₹1.5 lakh per annum, and the scheme matures when the child turns 21 or gets married after 18.

Why Choose It: SSY offers high interest rates compared to other savings options and is a great tool for building a fund for a girl's education or marriage.

5. Sovereign Gold Bonds (SGBs)

• Issued by the Government of India, SGBs allow you to invest in gold without the risks of holding physical gold. They offer interest (currently 2.5% annually) in addition to gold price appreciation.

Why Choose It: Gold is traditionally considered a hedge against inflation, and SGBs provide the dual benefit of security and returns on investment.

6. Recurring Deposit (RD)

• An RD allows you to invest a fixed amount every month for a fixed tenure and earn interest similar to an FD. RDs can be a good option for parents who want to invest regularly for their child's future.

Why Choose It: It helps build a disciplined savings habit, offering guaranteed returns, though lower than market-linked options.

 

Investment Strategy Based on Risk Appetite:

1. High-Risk Appetite (Aggressive Growth):
• 70% in Equity Mutual Funds (via SIPs).
• 20% in ULIPs (for insurance and market-linked returns).
• 10% in Sovereign Gold Bonds (as a hedge against market volatility).
2. Moderate-Risk Appetite (Balanced Growth and Safety):
• 40% in Balanced or Hybrid Funds.
• 30% in PPF (for guaranteed returns).
• 20% in Children-Specific Mutual Funds (education-focused).
• 10% in Gold Investments.
3. Low-Risk Appetite (Capital Safety):
• 50% in PPF/SSY.
• 30% in Fixed Deposits.
• 10% in National Savings Certificate (NSC).
• 10% in Sovereign Gold Bonds.