Listen to this article“The most valuable wealth of a man is his knowledge, which cannot be destroyed; all other riches that he has gained are not considered to be wealth at all.”
The great Tamil poet and saint Thiruvalluvar uttered these lines on education.
But what if I startle you with a brutal truth?
Education is the indestructible wealth one can acquire.
Yes! but it is not possible to acquire indestructible wealth without destructible wealth in this day and age.
This is where the importance of the best investment plan for your kids comes in.
Today, many parents compare different child investment plans, children savings plans, and child education investment plan options to create long-term financial security for their children.
I am reminded of a Tamil saying “Experience what it is to build a house and get a child married” probably that is the reason why wise parents want to invest in the best child plan to meet the long-term financial obligations like education and marriage costs of their children.
In addition, the rising inflation rate also calls for starting savings early in a child’s life.
However, it would be advisable to know, evaluate and compare various means of savings.
This could also enlighten you about how “child plans” need not be the only investment method.
Many investors now prefer combining mutual funds for kids, PPF child plan options, and SIP plans for children instead of relying entirely on traditional child insurance products.
Table of Contents:
- Disadvantages of a Readymade “Child Plan”
- Insurance in a child plan
- Manipulation through sentiment
- Alternatives for Child Plan
- Sukanya Samriddhi Yojana (SSY)
- Mutual fund as a child plan
- Child Plan Vs Mutual Funds: Which Is Better?
- PPF and Child Plan
- An Ideal Mix
- How to plan for your children’s education?
- How much to save for your Child’s education?
- Final Verdict
Disadvantages of a Readymade “Child Plan”
The ambitions of your kids are not always readymade, but why do you want your investment plan for your child to be readymade?
The best child savings plan in India is often the one that can adapt to your child’s dreams instead of locking you into rigid structures.
As parents what more is fulfilling than the fact that your child can pursue whatever he wants without much worry?
Higher goals require higher risk.
Even though it is not advisable to take too much risk into something as sensitive as education.
Education requires you to have a constant and secure flow of money.
But still, It is possible to come out of your conventional mind-set of investing and look for something that gives you more.
Insurance in a child plan
“Child plans” with insurance resemble unit-linked insurance plans. Starting early in a child’s life and ending only when the child attains maturity.
The amount of money invested in these plans is insignificant considering an inbuilt insurance component.
Several child savings schemes and children’s education insurance plans in India come with charges that reduce the actual long-term investment value.
Premium allocation charges are the commission paid to distributors.
This could lead to a low return in the initial stages and additional losses on leaving before the completion of the tenure.
Manipulation through sentiment
Most of the “Child plans” in the industry come with a catchy name to capitalize on the “Child sentiment” in us.
It is always advisable to use your critical thinking to avoid emotional decision-making.
A good child saving plan should focus more on financial practicality than emotional marketing or brand positioning.
“Don’t invest in a clichéd child saving scheme for the sake of investing, this will in turn make the future of your child’s life clichéd”
We need a different medicine for a kid and adults. But do we necessarily need different types of investment options for securing a kid’s future? Think!
Alternatives for Child Plan
A conventional investment plan is sustainable because of the hope that you will be able to provide for your children forever. But life has other plans,
What if you are not there for him/her in the future? There is a deep sense of relief when you know your children are safe after your time. Do you agree?
This is why many families today explore investment plans for children that combine safety, flexibility, liquidity, and long-term wealth creation.
It is to be noted that other investment products like the Public Provident Fund, National Savings Certificate, National Savings Scheme, RBI bonds, post office deposits, and mutual funds serve the purpose of savings and increasing capital value.
These investments apply equally well to a child’s future and provide the best support for expenses like education and marriage.
Sukanya Samriddhi Yojana (SSY)
A government scheme that ensures the betterment of a girl child. 50% of the money can be withdrawn when your girl child turns 18 to meet the educational expenses.
Among the best saving schemes for children in India, Sukanya Samriddhi Yojana remains one of the most tax-efficient options for girl child savings.
There are many schemes that we are unaware of. It will be great if you can spend a little bit of your time for the betterment of your children’s future.
We have discussed this scheme in detail. Please check below
Mutual fund as a child plan
Do you remember your time as a kid when your parents comfortably gave education to three or four children?
In this day and age, it is an uphill climb to satisfy the educational needs of even a single child.
“The cost of education keeps growing day by day and don’t you want to invest in something that keeps growing on par with the cost of education?”
Mutual funds are available in a wide range to satisfy all appetites for risks and are one of the best child investment plan alternatives you have.
A child SIP plan or SIP plan for child education can help parents build wealth gradually through disciplined long-term investing.
In addition, there are mutual funds that are designed for meeting the long-term financial obligations of children.
You could also invest in funds with the right balance between debt and equity that promise better capital growth than child plans. It is also possible to go in for a systematic investment plan that offers the opportunity of taking advantage of price differences and gain in the long run.
Systematic investment plans or SIP in mutual funds indeed help save entry costs and build a habit of regular savings for capital growth and meet children’s financial obligations.
It is also possible to avail of tax benefits as such funds are taxed only on maturity and a major child’s income would be taxed separately.
I am sure you would agree that this would help you to save unnecessary expenses and cut in investing child plans.
Child Plan Vs Mutual Funds: Which Is Better?
Many parents assume a traditional child plan investment is the safest option.
But is it always the best?
A readymade child saving plan offers structure but often comes with lock-ins and higher charges.
In comparison, mutual funds for kids through a SIP child plan provide flexibility, transparency, and better long-term growth potential.
For many families, combining children investment plans like PPF with mutual fund SIPs often creates a stronger child education investment plan than relying only on insurance-based products.
PPF and Child Plan
PPF or Public Provident Fund is also good as a mutual fund.
Opening a PPF account for 20 years in a child’s name will be one of the best ideas for meeting the education and marriage expenses in the future.
Many parents consider a PPF plan for child future expenses because of its safety, compounding effect, and tax-saving benefits under Section 80C.
Section 80C of the Income Tax Act gives an exemption if the money deposited is from the parent’s account to the minor’s PPF account.
Don’t fall into the trap of only a one-time investment plan for your child.
Instead of depending entirely on a best child plan one time investment, gradual investing often creates more stable long-term wealth.
It is also advisable that a slow and steady investment with good returns is a safe bet.
An annual investment of just Rs.100000 in PPF would leave you with almost Rs. 46 lac as a result of the compounding effect.
It is difficult for a “child plan” with insurance components and upfront charges to offer you such a great return without taking much risk.
An Ideal Mix
Even though you eat a lot of outside food for the sake of your taste buds, there is a sense of great relief when you eat at home.
It is not about sacrificing one for another but having a balance. It would be great if we can bring that balance in every aspect of our life.
The same philosophy will also apply to investment, right? investment plays a significant role in changing the future of your life.
The best plan for kids future is often a diversified combination of term insurance, equity mutual funds, PPF, and emergency savings.
You can plan for your kid’s future in a practical yet powerful way.
How to plan for your children’s education?
Instead of going for a “Readymade Child Plan”, you can customize their Investment Plan for your child with a combination of Term Insurance, PPF, and equity diversified.
A well-designed child education investment plan India strategy should balance growth, safety, liquidity, and tax efficiency.
If tax saving is your motive one can consider ELSS funds instead of a regular equity fund.
It gives you similar tax benefits to a child plan. You get 80 C benefits for your investments.
This can even beat the best children’s education insurance plans in India.
At the same time, the charges are very minimum and negligible when compared to “readymade child plans”.
You can increase or decrease your contribution every year depending on your financial situation.
How much to save for your Child’s education?
This is a question that is extremely hard to answer.
But always remember that investing in education is not like other investments where the return on investment Is the singular goal, investment in education is a ‘selfless investment’.
Every child education plan comparison should ideally consider inflation, career aspirations, higher education costs, and future lifestyle expectations.
To calculate how much to save for your child’s education plan, you need to decide how much you need for your kid’s higher education in today’s cost and a few other variables.
It is always good to keep an amount separate for education as there is a risk that urgent medical needs will force you to spend money on them.
With those details, you can easily calculate how much you need to save and how much can you get in the future for your child’s education.
To make this process much easier, we have given you an automated calculator below:
Final Verdict
So whenever you think of a best child investment plan think of a customized investment plan for your kid’s future with a mix of 2 or 3 investment options instead of a readymade product with a tag “Child Plan”.
The best child saving scheme is not necessarily the most advertised one, but the one that matches your financial goals, time horizon, and risk appetite.
I am sure you would agree that readymade child plans to prove to be not ideal investments for your child. The wisest line of thought would be a mix of diversified investments that give good returns with low charges.
Do you agree that a readymade child plan is not a better investment idea for your child? Kindly share your views on our ‘child plans review’ in the comment section.
To create not only a child plan and also to create plans for your retirement, for buying your dream home, and all other financial goals, you should work on a complete and comprehensive financial plan. To assist you in the process of creating a financial plan.
Thanks For the Clear Information Provided. Which Makes to Decide Which is Best to Invest.
Thanks, Santhosh. We are happy that our article made you decide with more clarity.