Children are a parent’s biggest joy. As a parent you have a nine months’ head start to prepare. As responsible parents, you need to invest for your child so that you can provide for him and help brighten his future. With higher cost of living and inflation, providing for a child’s current consumption, as well as for future needs, has become an overwhelming task. The best gift that a parent can give their child is the gift of savings, investment and future security. To ensure that you as a parent are able to provide your child with a permanent safety net, you can evaluate some of the investment options below:
As a parent one should ensure that they are adequately covered by insurance to protect their child’s future, in case of unforeseen events. Parents should assess the current and future needs of their dependents and take insurance that adequately covers these costs. This is a great way of providing for your child’s financial security and ensuring that he/she is not financially dependent on others for education or living expenses. The parent needs to evaluate the cover from time to time.
Debt instruments are basically fixed income securities that have the advantage of providing an investor with relatively low risk returns. In addition to the benefit of capital appreciation, fixed income securities provide investors with a steady stream of income generated from a portfolio. A child’s needs are plenty and can be recurring in nature. Expenses range from fees, medical, current education cost and future expenses for higher education. In order to invest for your child so that you can meet these needs, you should consider investing in low volatility instruments. An investor can choose to invest in fixed deposits, government bonds or debt mutual funds. Mutual funds offer a range of products in this category which include short term funds, income funds, credit risk funds and corporate bond funds.
As a parent, one needs to ensure that the investments grow at decent rate so as to ensure that the long term objectives are met. For this, one needs to have some exposure to stock market to meet long term goals and financial commitments. For a layman, the best way to invest in the equity markets is through Systematic Investment Plans (SIPs), offered by mutual funds. SIPs have multiple benefits which include:
o Allows “rupee cost averaging” to reduce the importance of timing
o Power of compounding
o Ability to invest as little or as much money as the investor wants
o Investing through experts
When you invest for your child, you are sowing the seeds for her future growth and stability. Such investments should be done judiciously, with the help of a financial planner.