Every parent wishes to give their child the best future. They want them to have a better education, a better health plan, a better lifestyle. Basically, they want to give their children a life they never had. To allow their children to have a carefree childhood and adulthood as well, parents may have to begin financial planning at a very early stage. If you are a parent to be or planning to have children, it may be the right time to invest to secure your child’s future.
Parents who have a moderate to high risk appetite and want to build a corpus for their children over the long term can consider investing in children’s fund.
What is a children’s fund?
A children’s fund is a solution oriented mutual fund scheme designed to help parents build a wealthy corpus for their children. Often referred to as Children’s Gift Fund, the investment objective of this scheme is to deliver returns that would offer financial advantage to children and can be utilized for their life goals like marriage or higher education or for achieving financial independence.
A children’s gift fund is usually a hybrid fund which invests in both equity and debt. This type of fund is ideal those seeking for an investment product that offers the best of both asset classes. The equity portion of the scheme aims to offer risk adjusted returns whereas the debt asset tries to offer capital protection when the markets turn volatile.
Hybrid funds are further classified as debt oriented or equity oriented. Depending on the investor’s risk appetite one can decide whether they want to invest in a hybrid fund that is more equity oriented or in a fund that is more debt oriented.
Benefits of investing in a children’s gift fund
Children’s gift funds is ideal for investors who wish to secure their child’s financial future by investing in a scheme whose underlying securities offer a balance of equity and debt. With the help of the corpus accumulated by this fund, a child may aspire and fulfil their monetary goals. The best part about investing in a children’s gift fund is that investors can invest in their children’s name. They cannot redeem the sum invested till the child attains age of maturity.
When you are saving for your children you are less likely to lose motivation and stop investing midway. Also, since this fund invests in equity it needs time to grow in corpus and deliver returns as per the investor’s expectations. By investing a small portion from their monthly income, parents will be able to build a wealthy corpus and give their children the future they deserve.
Start a SIP in children’s gift fund
Since you will be investing in children’s gift fund for a minimum period of 10 years you should consider investing in the scheme via Systematic Investment Plan (SIP). A Systematic Investment Plan is a simple investment approach where parents can save an invest a fixed sum in any fund of their choice. Through SIP, investors may be able to achieve a wealthy corpus over the long term. Investors can even automate their SIP transaction post which they don’t even have to make manual investments. Every month on the predetermined date, the fixed SIP sum is debited from the investor’s savings account and electronically transferred to the fund. Investors receive units in quantum with the sum invested and depending on the fund’s current NAV (Net Asset Value).
Investors can even refer to SIP calculator to understand how much money they need to invest to achieve the desired corpus
