Look Beyond child Insurance Plans- 3 safe investment options in India

For parents securing financially their children future is utmost priority, although there would many options available to secure your children’s future, Listed here safe investment options in India:

• Sukanya Samriddhi Yojana (SSY): for daughters only
• Equity mutual funds (MF): for both sons and Daughters
• Public Provident Fund (PPF): for both sons and daughters

SSY and PPF – one of the safe investment options in India

Since both are debt safe investment options in India, we will discuss them together (though Sukanya Samriddhi is only available for daughters).

When it comes to interest rates, SSY is better at 7.6 percent vs. PPF at 7.1 percent. But that shouldn’t be the only reason to pick SSY over PPF.

An SSY account can be opened for a girl child up to the age 10. It has a 21-year tenure (or it will close post her wedding). Deposits can be made till the 15^th year. The SSY corpus will still generate returns from the 16^th to the 21^st year. One cannot make any additional contributions from the 16^th to the 21^st year.
The entire SSY corpus is locked-in till the girl child attains the age of 18.

Nonetheless, there is some merit in the SSY, and it gives better tax-free returns. But if liquidity after the 15^th year is a concern, then having a PPF account as an investment options for children is also advisable, as one can withdraw funds from one’s PPF provides greater flexibility and can be used as an investment toll even after the daughter’s marriage or the closure of her SSY account.

Equity Mutual Funds – one of the safe investment options in India

But neither PPF nor SSY are the safe investment options in India, if your daughter’s higher education goals are several years away.
WHY?

That’s because both PPF and SSY as an investment options for children are long-tenure debt products. Given the high cost of education and the inflation these days, it’s possible that the savings in SSY and PPF alone will be unable to match the peace of inflation. The result will be inadequate savings. And that is something that you would never want as a parent.
Sound investment logic demands that when investing for long-term goals, it’s better to invest more in equity as that is the only viable option to generate inflation-beating returns in the long term. Doing so through a disciplined SIP in equity funds is your best bet.

Please go through this link before investing Mutual Fund: https://financekaaksha.com/web-stories/things-to-know-before-investing-in-mutual-funds/

How to split your money between MFs, SSY and PPF?

Here are a few thumb rules to follow for safe investment options in India

• If you are ultra-conservative and the goals are 15-lus years away, then keep it simple and give your 100percent to SSY and PPF
• If your children are older, the long lock-in periods of SSY and PPF may not align with your goal requirements. In that case you can pick a few debt MFs.
• If you have a moderate risk appetite, then allocate 50 percent to equity MFs, and split the remaining 50 percent between SSY and / or PPF.
• For moderately aggressive to aggressive investors, it can be 80-100 percent in equity funds, and the remaining (if any) in SSY/ PPF.

Below are few real numbers to suggest how much to invest for safe investment options in India:

• If you need to accumulate Rs 75 lakh in 15years, then invest 18,000-20,000 per month in an 80:20nequity MF: debt split
• If you need to accumulate Rs 50 lakh in 10years, then invest 24,000-25,000 per month in an 65:35nequity MF: debt allocation
• If you need to accumulate Rs 35 lakh in 6years, then invest 36,000-37,000 per month in an 40:60nequity MF: debt allocation

Thus, the earlier you start, the better it is.

Some of the questions on 3 safe investment options in India: