Five ways mums can save for your child's future

Five ways mums can save for your child's future

Mums have the power to shape the future of the child. A little financial planning would add to it. Here are five ways in which you can invest for your child's dreams.

Kids bring joy to our lives. But raising children has become an expensive affair. My grandfather raised three children and educated nine others just on his salary of ₹ 40 a month! Today, my wife and I often wonder if our collective incomes are enough for one child, let alone two children.

When I see around, I find that the decisions regarding investments for the child’s future are still largely taken by fathers. My sample size of friends and relatives may not be a representation of India as a whole, but I am sure that this is not a representation of a minority.

Mums have a huge responsibility of planning for their kid’s future along with the dads. However, many stay-at-home mums find it difficult to do so. Many still save using the banks Saving account, but the interest earned is not good enough. Here are five more ways in which you can save for your child’s future.

#1 Recurring deposit

Recurring deposit is one of the most underrated types of investment. In an RD, You can decide a duration and an amount you can spare monthly for the duration. The rates of interest are attractive, and you can plan for small events like the start of a school year or big events like a landmark birthday.

The beauty of recurring deposit is that even a small saving of ₹ 50 a day (1500/month) from the birth of your child will yield more than  ₹ 1 lakh for her 5th birthday or ₹ 2 lakh 64 thousand for his 10th. I am sure you can put aside this sum with a considerable ease.

Nowadays, some banks even allow you to keep the deposit amount flexible. That way, you can save more if you can in a good month.

#2 Systematic Investment Plans (SIPs)

Systematic investment plans may sound formidable, but are not very difficult to invest in. Like RD, you can set aside a small sum to be invested in mutual funds.

For those who have not explored mutual funds, here is a small explanation.

Shares of a company, or equity, offers you a chance of owning a small part of a company. As an owner, you will benefit from the profits but suffer the losses as well. Though share prices are not directly linked to the performance of the company, they are hugely dependent on it, for most of the times. This makes equity investment a bit riskier.

A mutual fund is a collection of shares of different companies in different proportion. It is then offered as parts and you can own a part of the big pot. As the shares are of different companies in different proportions, all of them performing badly would be rare.

You can start investing as low as ₹ 500 a month, for a longer period. This way, you would be able to plan for her college.

Watch this brilliant film on SIPs.

Read on for more ways to invest

#3 Endowment plans

These plans are typically offered as a fixed term investment with something called as an ‘assured sum’. These would not get you phenomenal returns, but would help you plan for fees and other expected expenses.

#4 Fixed deposits

These should form a part of your investment. Fixed deposits are risk-free investments with a guaranteed rate of return. Also, you can claim tax exemption under 80 C if you invest between 10000 and 150000 for five years. You can invest in one every year, and you can start getting returns from the fifth year.

#5 Public Provident Fund (PPF)

This is a fantastic scheme where you can invest a minimum sum of ₹ 500 and a maximum of  150000, and get a tax rebate for it! Even though this investment is locked in for 15 years, but the rate of interest is often more than the highest Fixed deposit rates offered by any bank. You can start your PPF account and plan for some good returns after fifteen years.

My mum is my inspiration when it comes to saving. Not only did she fund all the extra classes I took, she also managed to invest in a small house on her own, on a moderate salary. You already know the reasons you want to save, I hope these options would help you actually save for your dreams.

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Written by

Anay Bhalerao

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