Best Investment Plans Or Strategies For Your Child’s Career – PPF, RBI Bonds, Post Office Instruments, A Traditional FDs

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Every parent wants to give his/her child a quality education and a bright future. We all know, as inflation rates approaching double-digit levels in India, education costs will not be an exception. Quality education is getting expensive day by day. And just think after 20 years what will be the cost of education.

At present a two year MBA program in a reputed business school costs Rs. 5,00,000. If Our child after 20 years, wants to pursue a management degree, the same education would cost around Rs. 20,00,000. What we as parents are doing towards this contribution?


Most parents, when think of investment for their child, first look for investment products that are actually termed as 'Children's Plans.'  But that is the place where we go wrong.  It is true that insurance companies offer the maximum products in this category. But after all these insurance products are nothing but modified endowment or money back policies, which suffer from the limitation of low returns and high costs.

           

Now next question comes, if not children’s plan, then where do we go. How much to invest and where to invest? Here is an answer
The factors to consider while planning for investment…..

• Time frame for building a corpus
• Age at which the fund would be required.
• Approximate amounts to build the corpus.
• Investment avenues to be considered
• The amount available to the child in case of death of parents or disability of the premium-paying parent.

 If we have answers to these above questions, then by doing regular and systematic contribution surely we can accomplish our goals. It is not wise to invest all the money kept aside for the kids in any one instrument.
             Ideal Mix:

Traditional Insurance Plans	10%
Unit Linked Plans	10%
PPF And Other Post Office Instruments	15%
FDs And Bonds	15%
Mutual Funds	20%
Direct Equity	20%
Commodities	10%

Ultimately, our goal is capital growth - as fast and safely as possible. If one really wants to go for insurance policies, instead of taking child policies, opt for term insurance. Term insurance is an instrument which ensures maximum life cover at the lowest possible cost. All the money that you would save on account of the low premium can be invested for the long-term for your child.
Here are the 3 investment instruments, a debt type, where one can be fully assured of returns. These are the less risk and less returns ones compared to equity or hybrid types.
Post Office Instruments: There are plenty of post office schemes available in the market. National Savings Scheme, Monthly Income Scheme,  Kissan Vikas Patra, Recurring Deposit, PPF. In every scheme you have a predetermined returns and absolutely no risk.
PPF: An instrument which is not just a 15 year investment plan , can be extended to indefinitely but subject to 5 year block at a time . In case the account is extended without contribution, any amount can be withdrawn without restrictions. However, only one withdrawal is allowed per year. The balance will continue to earn interest till it is completely withdrawn.

RBI Bonds : Widely used bonds by individual investor are Infrastructure bond, Capital gains bond and RBI Tax Relief Bonds.  The first one, infrastructure bond is mainly tax saving instruments, considered to be safe, but there is no assurance of getting the full investment back. When one sells any capital asset (like a house property), a capital gains tax liability can arise on the same. There is an option of not paying any long-term capital gains tax by investing the profit in capital gains bonds with a stipulated time period.  Here the capital gains bond comes into picture, an idea of a low-risk but assured-returns investment avenue, coupled with the prospect of not paying any tax. RBI Relief Bonds are instruments that are issued by the RBI, carry around 8% of rate of interest. Maturity period of these bonds is 5 years, interest received is tax-free in the hands of the investor. There is no terrific capital appreciation or a substantial margin over inflation. But there is no better deal when it comes to safety. RBI Bonds are sold at RBI branches and through a number of commercial bank branches.
Traditional FDs : As every one knows, a fixed deposit account allows to deposit money for a set period of time, there by earning higher rate of interest in return. As the above instruments, here also one can expect less risk and less return, as it is a debt instrument.
Here is just a guide that gives an overall picture of all the instruments available for the investment. A knowledge from books, net and experience. It is wise to consult professional financial adviser before making any investment.