3 schemes you absolutely must know if you’re planning ahead for your child’s education

Parents dream to offer the best possible education to their children. But the ever-rising cost of education makes it tougher for most parents to achieve this goal, unless they make good investments after thorough research.

Sukanya Samriddhi Scheme:

The Government initiative, Sukanya Samriddhi Scheme is designed to encourage savings for the girl child. It is an ideal vehicle to meet your little girl’s higher education and marriage requirements. Also, the scheme allows partial withdrawals after the girl turns 18.

·  The age of the girl child should be 10 years or less on the date of account opening.

·  The child should be an Indian citizen to be eligible for the scheme.

·  Parent or legal guardian of the girl can open the account.

·  Minimum of INR 1,000 and a maximum of INR 1.5 lakhs can be invested in the account, each year. Deposits can be made as a lump sum or can be spread out all through the year.

·  The deposits are to be made until 15 years from the time of account opening. The investments will mature 21 years after the account opening.

·  An attractive interest rate is the main feature of the scheme, which allows the savings to grow.

·  This is an EEE (Exempt, Exempt, Exempt) product eligible for tax exemptions under Section 80C.

Public Provident Fund:

The Public Provident Fund (PPF) scheme is yet another investment option popular for its EEE feature. The tax exemptions are applicable for the deposits made under this scheme, the returns earned and on the total withdrawal amount at the time of maturity.

·  Indian residents and individuals on behalf of minors can open PPF account.

·  It is a long-term investment vehicle for 15 years.

·  Minimum deposits of INR 500 and a maximum deposit of INR 1.5 lakh can be made in one financial year.

·  A maximum of 12 transactions can be made as deposits in a year.

·  Partial withdrawal facility is available from the 7th year of the account opening.

·  Account can be extended for 5-year periods after maturity.

Investments in Mutual Funds and Term Plan

Mutual fund investments with an efficient fund management and a thorough risk appetite calculation is a better-return generating option. The market risks involved in the mutual fund investments can be minimized with proper diversification and long-term planning.

·  Mutual fund investments provide the ease of investment i.e. the investors can choose to invest as per their convenience.

·  An systematic investment plan (SIP) in a diversified portfolio is a simple mode of mutual funds investment.

·  The compounding power that comes with long-term mutual fund investments helps beat the inflation rate and achieve the target corpus on time.

SIPs yield better financial rewards when parents maintain financial discipline till the target date. A monthly investment of INR 5,000 in mutual funds can fetch approximately INR 19.5 lakh in 18 years, assuming 12% annual returns. The right SIPs can be selected based on the investment horizon and the risk appetite of the investor. The early you start your investments, the higher would be the returns.

Additionally, opt for the term insurance policy that covers the child’s future financial needs, in the case of your death. Ensure that the term insurance covers the child’s all major expenses like education, marriage, and livelihood. Seek more financial advice and get a personalized financial plan from the expert planners like ArthaYantra.

Feature Image Source: India Today