Parents should buy insurance policies and properties to secure their children’s future. However, taking precautions is crucial when dealing with such financial matters.
Many people work hard to provide for themselves and their descendants for current and future needs. The ultimate goal is to ensure their children’s stable and secure life.
After the birth of their children, newly married couples often consider taking out insurance policies in their children’s names. However, it’s essential to consider the implications of such decisions carefully.
While parents want to ensure that their children will be financially supported in unforeseen circumstances, they do not wish to benefit from any misfortune that may befall them.
It’s worth noting that insurance companies may issue policies in the name of children but may not provide coverage until they reach a certain age. As a result, financial experts advise against taking out insurance policies for newborn babies.
For instance, if a newly married couple takes an insurance policy on the advice of an insurance agent when a child is born, and there is no policy in the person’s name by the time of death, the family may face financial difficulties.
In addition to insurance policies, financial experts recommend considering Public Provident Fund (PPF) schemes and mutual funds as alternative options for securing children’s future financial needs.
It’s essential to be aware that insurance policies are long-term commitments, and failing to pay due to future financial difficulties may result in surrender charges.
When purchasing property in the name of children, it’s essential to be cautious, as there may be legal complications, such as the need for court permission to sell immovable properties held in the names of minors.
Grandparents may opt to buy immovable properties in their grandchildren’s name to safeguard against potential misappropriation of property held in their parents’ names.
Bank deposits in the name of a minor child can be canceled midway, and written consent is typically required for taking a loan against such deposits.
Ultimately, it’s important to carefully consider the best financial options for securing a child’s future, including suitable insurance policies for parents and child policies that provide comprehensive coverage.
Secure Your Child’s Future: Education Investment Tips
Every parent’s primary goal is their child’s future. A good education is essential for providing children with a golden future.
However, the cost of education is not just rising; it’s skyrocketing faster than inflation. It is crucial for every parent to not only keep up with this trend but also select an income path that can outpace it.
Education inflation is estimated to be around 12 percent per year. Consequently, education costs may skyrocket in the coming years. To prepare for this, it is crucial to invest early.
Equity index funds are among the best options for parents looking to secure a bright future for their children. These funds have a track record of delivering high returns, with market experts suggesting that they can outpace rising education costs, easing parents’ financial burden. The key is to start early and stay committed to your investment strategy.
The Effect of Education Inflation: If a program like EduCane costs ₹1 lakh today, at a rate of 12 percent education inflation, that program will cost approximately ₹8 lakh in 18 years. Simple savings accounts or traditional fixed deposits do not grow at this rate.
However, equity indices such as Nifty 50 or Sensex have provided annual returns of 14 percent and 15 percent, respectively, over the last 20 years. By investing in these indices, parents can help their children obtain a quality education at a lower cost.
For instance, making a monthly SIP (Systematic Investment Plan) of ₹5,000 in an instrument that yields an average annual return of 13 percent and increasing this amount by 10 percent annually can create a corpus of over ₹79 lakh in 18 years.
Why Are Equity Index Funds Special? Equity index funds, which track the performance of market indices like Nifty 50 or Sensex 30, provide high returns with relatively low investment.
These funds, known as passive funds, offer stable and solid returns over the long term. Unlike active funds, they do not depend on the expertise of a fund manager; they grow alongside the market.
In the past year, the Nifty 50 and Sensex 30 have increased by 22 percent and 21 percent, respectively, showcasing their potential for long-term stability. Moreover, the expenses associated with index (passive) funds are significantly lower than active funds, typically less than 0.10 percent.
Stop struggling to meet rising education costs—let the stock market do the work for you. Investing in equity index funds is not just a smart strategy; it’s the smartest strategy for funding your children’s education, allowing you to provide them with a secure future. And remember, the key to this strategy is to start early.
Disclaimer: This information is for educational purposes only. Investments in mutual funds, the stock market, cryptocurrencies, shares, forex, and commodities are subject to market fluctuations. Returns on investment instruments may vary depending on market conditions. ‘Money Vitta’ does not endorse investing in or withdrawing from any specific mutual fund, stock, or cryptocurrency. It is essential to thoroughly evaluate all details before making investment decisions and consider seeking advice from certified financial advisors if needed.