How to Get your Finances Ready for your Child’s Future Goals?

As parents, you may want to be able to fulfil your child’s dreams, no matter what they are. However, procuring funds at the last minute will not help you do this, especially owing to inflation. So, start building a balanced investment folio today. You can consider both short-term investment options and long-term investment options for your child.

One of the safest options you can consider is an FD for your child. On the other hand, you can also invest in mutual funds and equity investment according to your risk appetite. Making smart investments will help you fund your child’s education and career needs with ease.

Here is how you can create a growing investment portfolio for your child’s future.

Invest in FDs

Fixed deposits bring a lot on the table with high earnings and assured returns, so base a lion’s share of your investment folio on FDs. Fixed deposits fall under the category of ‘time deposits’. Staying true to the nature of all time-bound deposits, FDs accumulate interest on your invested sum through your chosen tenor.

This is a one-time deposit scheme and based on the amount you choose to invest, you will have to lock in your investment and its interest earnings until maturity when you choose the cumulative variant. You can choose FDs with a frequency ranging across monthly, half-yearly, annually, and quarterly compounding.

As per market trends, FD interest rates vary across financial institutions and generally fall in the category of 7-8% interest per annum. You can choose the tenor within a time frame of 12-60 months for earnings that beat inflation. Consider the Bajaj Finance FD for your child and gain from 8.40% to 8.75% interest on your investment. This interest also qualifies as one of the highest offerings by any financial company in India. The security attached to a Bajaj Finance Fixed Deposit is very high, as it has been awarded ICRA’s MAAA (Stable) Rating and CRISIL’s FAAA/Stable Rating.

If you seek both flexibility and regular earnings from your FD, you can invest in a non-cumulative fixed deposit. This will help you finance your child’s needs at frequent intervals with ease. Invest in a sum by choosing a long maturity tenor and a good compounding frequency. You can use the FD calculator to calculate your returns in advance based on the interest rate and tenor and accordingly decide the exact amount for investment.

Invest in mutual funds

You can invest in mutual funds in two ways, either in a lump sum or through a SIP. Either way, your investment in mutual funds is pooled and invested by your chosen fund house. This helps in securing higher returns on your investment over a period. Certain mutual funds also help you save tax such as ELSS. Investing a lump sum will mean locking your funds for a fixed tenor.

When you invest using the SIP route, you can keep aside a fixed amount as low as Rs. 1000 a month. This will offer you better security against market fluctuations by lowering your risk. Moreover, SIPs with unspecified lock-in period can be withdrawn after one year in case you need to fund your child’s immediate needs. Remember that in this case, you cannot claim any tax benefits on your investment. In case you withdraw the investment before one year, you will also have to pay an exit fee.

Insure your life with your child as a nominee

Term insurance or life insurance policies do not only work as your security, but also can be used to secure your child’s future. You can buy a policy from reputed companies and financial institutions in your name and put forth your child as a nominee for the policy.

You can buy several insurance policies in both you and your spouse’s name and make your child a nominee for all. This will help you safeguard your child against unforeseen events. Your child can use funds from your insurance to pay for their future goals.

So, prepare yourself for your child’s future both financially as well mentally and emotionally. Support them in their endeavours and fund their goals without money being an obstacle.