How to start investing for your newborn child
How To Start Investing For Your New Born Child
Many children receive small amounts of money as gifts on occasions like their birthday, winning a competition, performing well in a sport and so on. Instead of letting this lie idle, many parents are now moving such savings into mutual funds.
If you’re a new parent up to your eyes in diapers, chances are you may also be overrun with checks and cash from family and friends welcoming the baby to the world. Assuming you don’t need the cash for necessities like strollers and formula, it’s a good idea to put the money aside for your child in a safe place where it can mature—but which saving vehicles are best? We checked in with certified financial planners nationwide to get their opinion on the best places to set aside baby’s money for safekeeping and growth.
The best Investment Plan for a New Born Baby in India are …..
- Gold – but gold at your convenience and convert into Gold Bonds nearby Banks as per Government announcement. It’s good to have Gold savings scheme for a Girl Child in India. Never pledge the Gold for any reason. It’s her purpose only.
- Post Office PF account or other checks with them which give high returns, Monthly savings a fixed amount in your daughter’s namesake. Don’t touch it at any given time for any reason. It’s for her. Utilise for her education, gold and property purpose. Never do any business with the amount.
- If you are able to Trade in Stock Market – Start accumulating a few selective Shares like Titan, TBZ, MRF, Bosch, Reliance, ITC, HUL, Pidilite, Emami, Jubilant Food, Wipro, Maruthi, L&T, Biocon, in A Group of BSE and NSE Nifty shares. Return will be high – monthly buy – hold more than 7 years – sell and purchase a Residential or Commercial Plot / Property if you can. Never Trade in Shares for Intraday or short Term purpose. Stock Markets may go down temporarily but, will rise again. Invest in Blue chip companies – how to know? Simple go to a Banker like HDFC / ICICI / Axis Bank or other ask is there Shares Loan against Shares you hold – they give a List of shares – please check and start accumulating them. Option 2 you can check the Popular Brands Stocks – who pay dividends and declares Bonus in different periodicals. Select those stick for 5 to 7 years with those stocks. Option 3 Check with Mutual Fund Stocks/Schemes and the list of shares they hold – invest in those also a good option.
- Go for Home Loan – take 30 to 35 years maximum EMI but at middle repay a higher amount of possible and reduce the period. The home is for your daughter’s purpose.
- Last, you can go Life Insurance Policy for your daughter’s purpose and any Mutual Fund – SIP (month by month savings) program.
So, if you are not sure how to invest for your child, here are some things we hope will give you a little inspiration:
- A good education
- An investment in talent
- A gap year
- The big occasion
- Family holidays
- Sunny day fund and lastly,
- The investment portfolio to help you achieve your goals.
Children’s easy-access savings: Children’s savings accounts work in a similar way to ordinary savings accounts, with the maximum age ranging from around 15 to 20 depending on the account you choose.
While these accounts have the advantage of allowing you to contribute and withdraw money whenever you want, any interest earned is liable for the tax.
Children’s regular savings: If you’re able to commit to making monthly contributions, then you can often benefit from higher rates of interest with a regular savings account.
They’re ideal for savers who are saving for something specific and wish to drip-feed cash into their account in a disciplined way.
These accounts will usually limit the number of withdrawals you can make each year and restrict the amount of money you can invest each month.
Be careful not to miss a payment or exceed the limit on withdrawals, as doing so can cost you interest.
Child Future Plan:
- Buy a health insurance policy with maternity benefit: Nowadays there are many health insurance policies which have maternity benefit as a special feature. Expenses at hospitals and regular checkups are mounting day-by-day and this feature will help in reducing the burden on finances. If you are employed you can check whether this feature is there in the employer-provided policy.
- Start a baby fund by regularly setting aside an amount every month to manage the expenses related to vaccinations and other medical check-ups. This amount has to be increased by an appropriate amount if both parents are working and after the child’s birth, the wife is planning to quit the job or remain on leave even after maternity leave is over.
- Start hunting for bargain deals on baby equipment. Buying the best car seat, stroller etc. for the child’s safety and comfort. Paying the full price is often a waste of money. Babies quickly outgrow many of these items. It is advisable to start checking with friends and acquaintances and stores that sell used goods; your baby will never know the difference. And this, in turn, will save you a lot of money.
- You should have a thorough understanding of your finances. You should not enter into this responsibility if you are burdened with debt. Your EMI should not be more than 10-20% of your income at this stage since your expenses are going to increase soon.
Then you become gender biased.
What?? But you said, “There has been a paradigm shift in the thought process of people and generally they don’t make any difference between son and daughter.” Still, there are some societal concerns which many people don’t want to overlook. For e.g. spending heavily on a daughter’s marriage. You may compromise on the son’s marriage but for the daughter’s marriage, no parent wants to cut corners. So this becomes one of the major goals in life. Concerns about helping the son settle down, gifting the daughters-in-law on some regular occasions and festivals and taking care of the children (even after marriage) are concerns for most of the parents these days. So, this increases the importance of financial planning. Nowadays, people are not only concerned about savings but also the distribution aspect. Savings are important but your planning should be tax efficient also.
Child insurance plans are of two types:
- Investment plans – Plans that invest in the equity/ debt market (Non-Participating Unit Linked Insurance Plans). In this plan, you pay regular premiums or for a limited period which are invested in both equity and debt instruments. Being market linked, these plans can give good returns over a long policy term. Based on your financial risk appetite, you can choose from fund options with varying degrees of risk (equity-debt allocation).
- Savings plan – Plans that do not invest in the market (Non-Linked Participating Insurance Plans). In this plan, you pay regular premiums or for a limited period and at the end of the policy term, you receive guaranteed pay-outs every year. Additionally, you receive any accrued bonus.
In both plans, in the event of your death, your child/nominee receives a lump sum amount (death benefit). In addition, the policy continues and all the future premiums are waived by the company. The child will still receive the maturity benefits once the premium payment term is over. In addition, he/she will also receive the accrued bonus.
Parenting these days is much more challenging than what it was a few decades ago. There is immense pressure on parents to perfect the art of parenting to bring out the best in their child. The good news is that both mom and dad are equally involved, which makes sure that every little detail is taken care of. One such critical detail, where both parents have to step-up their game is financial planning for the child. The biggest challenge for parents today is to muster the finances to match the mounting costs of education and marriage.
With children taking to hobbies like music and art as alternate careers, parents have to shell out a lot more on their children than the previous generation.