For newly married couples, the birth of the child is a time for joy and excitement. Hope and happiness also bring the responsibility to raise the child. Expenses like education and health are inflationary in nature. Hence you should aim to invest regularly and systematically in various investment options for the child. Some examples of such investment are Fixed deposit for the child, Child insurance plan, PPF, Sukanya Samruddhi account, equity mutual fund among others.
The very purpose of the fixed deposit is the safety of capital and assured return. Many young couples invest in bank fixed deposit, due to the safety net provided. However, safety is limited to Rs. 1 lacs insurance by the government. Any amount above Rs. 1 lacs in any bank is not insured by the government. Moreover, the FD rates offered by the banks are very low, raising the risk of lower corpus over the long run. You can use the FD Monthly interest calculator to measure the effect of even one percent interest rate over the period of 15 to 20 years. Many reputed NBFCs like Bajaj Finance offers ‘bank-like safety’ and ‘better than bank’ interest rates on your fixed deposit. While you invest in NBFC FD, ensure AAA rating by independent financial rating agencies like CRISIL and ICRA. At the same time, ask for the last ten years’ repayment track record to ensure the safety of your investment. To avail large corpus in the long term, consider investing in five years fixed deposit with a cumulative option. It will give your investment compounding power of time and higher interest rate both.
Sukanya Samruddhi Yojna
For the girl child, the central government has initiated a unique scheme, called Sukanya Samruddhi Yojana. The scheme is the boon for the parents of the girl child. You can invest regularly for 21 years for the benefit of your girl child. The investment amount is limited to Rs. 1.5 lacs every year. You can also avail the deduction under section 80 C of the income tax act. However, for the parents with relatively limited income options, the scheme may create liquidity issue, as your money is locked for long years and cannot be accessed in case of an emergency. Hence, it is advisable to open a separate fixed deposit account to attend an emergency in the family.
The child plans are basically insurance plans of parents’ life for the benefit of the child. You can avail such plans from various government or private insurance companies. In case of an unfortunate demise of the parents, the child gets the amount of the sum assured. The balance premium is also waived off without loss of any policy benefits. There are many variants of child plans, that can give you periodic pay-out at regular intervals, to support the education-related expenses of your child.
Public Provident Fund(PPF)
The PPF account is all time favorite investment option for Indian investors. You can open PPF account for your child for the duration of 15 years. Till the child attains 18 years of age, the account shall be treated as a minor account. You cannot withdraw money till 18 years of age of your child. However, you can avail tax benefit under section 80 c in the form of deduction of income. Similar to Sukanya Samruddhi account, PPF lacks liquidity till maturity age of your child. Hence, you should invest carefully in child PPF and ensure enough liquidity by other investment options like a fixed deposit. You can also Calculate PF Balance through PF Calculator.
Equity Mutual Fund
Equity has the power to beat inflation in the long run. However, you should remain invested in the really long run of 10 to 15 years or more. In the short run, equity markets can generate a negative return as well. Factors like political uncertainty due to national elections or geopolitical tensions or war-like situations can create melt-down in the market. Hence, you should only invest a very small proportion of your income into equity mutual fund that you may not need in the near future. It is better to take the SIP route if you want to invest in equity mutual fund for your child.
4 Questions You Must Ask Your Financial Adviser
Money is one of the essential things to survive. But, it is not only about having enough money that makes life smooth because if you don’t know the right way to manage it, then things might get worse.
So, if you earn well, have a lot of money and don’t have a clear idea about managing it properly, then seeking help from a reliable financial adviser is a great idea. However, you must know that all financial advisers do not work in your best interest, and some may even try to fill their pockets by selling commission-based products instead of giving you the right investment advice.
If you are unsure about how to deal with a financial adviser in Blackpool or wherever you live, then here are a few questions to ask them before investing your money.
1. How Will They Invest Your Money?
It may come as a surprise to you, but many people don’t ask their financial advisers about how they are going to invest their money. Well, you must always start the process of your financial protection by asking this very question because it will provide you with a clear idea about how your portfolio is going to be managed.
Ask your financial adviser about the strategies they are going to implement and at the same time, you may ask for the explanation of the chosen strategies.
2. What Is Their Qualification?
You must always ask your financial adviser about their qualifications and what all certificates do they hold. Many firms ask the financial advisers to either pay a certain amount as fee or take a course. Now, you must avoid such advisers and look for either a certified financial planner and public accountant, or a chartered financial analyst.
Besides the qualifications, it is always good to go with the advisers who hold some experience in the field. Also, look into their speciality and the number of clients they deal in a year.
3. How Much Do They Charge?
It is always a good idea to enquire about how much they will charge you for seeking their services. If your adviser is paid a fee and does not get a commission on products, then they will work in your best interest instead of acting like a mere salesperson.
4. What Are The Available Options For Liquid Savings?
Many investors like to start their investment journey by focusing on the liquid savings fund and seeking help from expert advisers. Well, it is the first act of defence for making a personal investment and the main reason behind seeking guidance from a professional adviser.
So, never hesitate to ask your adviser questions regarding the reliable options available for a liquid investment.
The Final Say
When you look for a baby sitter for your little munchkin, you just don’t end up picking the first person you interview. Right? You go through the entire process of interviewing different baby sitters and then choose the one you find the best.
Well, that’s how it has to be with finding a financial adviser because you just can’t trust any random person with your money. So, don’t feel afraid to talk to different advisers, ask your questions to them because doing this will help you save your investment in the best possible way.