Investment schemes with lockin period are ideal for kids

Parents should choose investment schemes having a lock-in period, so that come what may, they cannot dip into the corpus meant for children's future

answers:

I am 32 year-old and a father of three year-old girl. My wife is a home-maker and my monthly salary is Rs 60,000. After debiting all the expense, I save around Rs 25,000 to 30,000 monthly. I am thinking to invest some amount for my child's future. How should I go about it?




One of the major financial goals for parents is to provide a sizeable corpus for the higher education of their children. Disciplined investing through mutual funds can help them achieve this goal. The education cost inflation is much higher than the other ones. Any investment made, to meet this has to be in an appropriate asset class, which can help tide over this inflation. Assuming a current cost of Rs 10 lakhs for any professional course, over the next 15 years, this is likely to go up to approximately Rs 42 lakhs, considering an average inflation rate of 10 per cent per annum.

One of the appropriate categories of mutual funds for this goal is Children Gift Funds category (Now known as Equity Oriented Hybrid Funds). Some of the mutual fund houses are having these schemes, with a track record of almost 15 to 20 years, with a range of returns between 11 per cent to 15 per cent annualised over their respective tenures. Going forward, if one can take even a conservative 9 per cent to 10 per cent return over the next 15 years it will go a long way in helping the children at the time of their education.

Some of these also offer an additional facility of locking these investments until the children attain the age of 18. If the purpose of this investment is specifically for meeting their education cost, it really makes sense to opt for this lock -in, so that, come what may, the parents cannot dip in to this corpus. I would really recommend you to invest some amount monthly to these children schemes with a lock-in option.

Having said that, the ideal way to start any investment plan is by classifying the needs or goals. For child future plan, we need money on regular intervals, and one can classify those needs as short, medium and long term. Once this is set, you can accordingly choose the investment plan. However, you should start investing now to enjoy the good returns down the line