Education is one of the most important investments that parents make for their children’s future. However, with the rising cost of education in India, it has become imperative for parents to plan and invest early. Smart investment options for children’s education in India can ensure that parents provide their children with quality education without financial constraints.
This is why understanding the various investment options available for children’s education in India is crucial.
In this article, we will explore some of the best investment options for children’s education in India that parents can consider to secure their children’s future.
Best Investments options for Children’s Education in India
1. Public Provident Fund (PPF):
It is a long-term investment option that offers a fixed interest rate and tax benefits. Parents can open a PPF account for their child and contribute to it regularly to accumulate a significant corpus over time.
2. Equity Mutual Funds:
Equity mutual funds offer a high return on investment in the long run, making them a good investment option for children’s education. However, they are also high-risk investments, and parents should consider investing in them only if they have a long-term investment horizon.
3. Sukanya Samriddhi Yojana (SSY):
This is a government-backed scheme that is exclusively designed for the education and marriage expenses of a girl child. It offers a high-interest rate and tax benefits, making it an attractive investment option for parents.
4. Unit-Linked Insurance Plans (ULIPs):
ULIPs offer the dual benefits of investment and insurance. Parents can invest in ULIPs and accumulate a corpus over time while also ensuring that their child’s future is protected in case of any unforeseen circumstances.
5. National Savings Certificate (NSC):
NSC is a safe investment option that offers a fixed interest rate and tax benefits. It has a lock-in period of five years, making it a good long-term investment option for children’s education.
6. Child Education Plan:
Many insurance companies offer child education plans that provide financial security for the child’s future education needs. These plans offer guaranteed return and maturity benefits, making them a good option for parents looking for a low-risk investment.
7. Equity Shares:
Equity shares are a popular investment option that offers high returns but also comes with higher risks. Parents can choose to invest in individual stocks or invest in mutual funds that invest in stocks.
8. Alternate Investment Funds (AIFs):
AIFs are private investment funds that invest in different assets such as private equity, venture capital, and real estate. These funds are managed by professional fund managers who aim to generate high returns for the investors.
FD for Children’s Education
Fixed deposits (FDs) are one of the safest and most popular investment options for children’s education in India. They offer a fixed rate of interest and are relatively low-risk compared to other investment options. Here’s what parents should know about investing in fixed deposits for their child’s education:
1. Fixed tenure:
FDs have a fixed tenure, which can range from a few months to several years. Parents can choose the tenure based on their investment horizon and the time when they will need the funds for their child’s education.
2. Fixed-rate of interest:
The interest rate on FDs is fixed for the entire tenure of the deposit. This means that parents know exactly how much their investment will earn in interest over the investment period.
3. Easy to open:
Opening an FD account is easy, and parents can do it online or by visiting their bank branch. They can also choose to invest a lump sum or opt for a recurring deposit,deposit where they make regular deposits period of time period.
4. Tax benefits:
Interest earned on FDs is taxable. However, parents can claim a deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act by investing in tax-saving FDs. This can help reduce their tax liability.
5. Penalty for premature withdrawal:
If parents need to withdraw the funds before the maturity of the FD, they may have to pay a penalty, which can vary depending on the bank’s policies.
Conclusion
Investing in your child’s education is one of the most important investments you can make for their future. There are many investment options available in India, ranging from low-risk options such as fixed deposits to higher-risk options such as equity shares and AIFs.
Parents should consider their investment horizon, risk appetite, and financial goals before choosing the best plan for their child’s education. One-time investment plans and private investment plans offer different options for parents, each with their own advantages and disadvantages.
It is always advisable to seek the advice of a financial advisor before making any investment decision. By investing wisely, parents can ensure that their child’s future educational needs are met and provide them with a strong foundation for a successful future.