Investment Strategies for New Parents: Securing Your Children's Future

Becoming a parent is a transformative experience, filled with love, responsibility, and a desire to provide the best possible future for your child. In today’s dynamic economic landscape, traditional notions of financial security may no longer suffice. As new parents, it’s essential to reevaluate your financial planning and take proactive steps to secure your children’s future. Let’s explore some investment strategies tailored for this exciting phase of life.

1. Evaluate Your Existing Insurance Coverage

• Health Insurance: Ensure you have health insurance that covers maternity expenses and includes your newborn from day one. Some providers extend coverage only after 90 days, so verify the details and consider switching if necessary.
• Life Insurance: Adequate life insurance safeguards your family’s financial well-being even if you’re not around. Assess your coverage and adjust as needed.

2. Set Clear Financial Goals

• Identify short-term and long-term objectives. Consider:
  • Education: Prioritize saving for your child’s education.
  • Emergency Fund: Having a child raises the stakes for rainy-day planning.
  • Retirement: Don’t neglect your retirement savings.

3. Start Early: The Power of Compounding

• Begin investing as soon as possible. Compounding occurs when your investment returns get reinvested, generating additional returns over time. Starting early allows you to benefit from this effect. You can also try the Power of Compounding Calculator. Example: Two individuals, A and B, both aim to invest in their child’s higher education, targeting a lump sum of Rs. 75 Lac when the child turns eighteen.

4. Explore Investment Avenues

a. Public Provident Fund (PPF)

• Government-backed savings scheme with tax benefits.
• Ideal for long-term savings and retirement planning.
• Public Provident Fund (PPF) is another best money investment plan that new parents can invest in.
• This plan has a lock-in period of 15 years.
• In case of a financial emergency, the policyholder can withdraw a partial amount during the 7th year of the policy.
• The interest rate the Public Provident Fund (PPF) offers is 7.1% on an annual basis.
• The money investment plan offers tax deduction benefits of up to Rs. 1.5 lakhs in one financial year under Section 80C of the Income Tax Act, 1961. However, these laws are subject to change from time to time.

b. Equity Linked Savings Scheme (ELSS)

• Tax-saving mutual fund schemes primarily invest in equities.
• The lock-in period of 3 years; potential for high returns.

c. Fixed Deposits (FD)

• Low-risk fixed-income instruments offered by banks.
• Suitable for short-term savings.

d. Mutual Funds

• Diversify your portfolio with professional fund management.
• Choose from equity, debt, or hybrid funds based on your risk tolerance.

e. Real Estate

• Consider investing in residential or commercial properties.
• Historically offers returns of 8% to 10% per annum.

f. Gold

• Hedge against inflation and diversify your portfolio.
• A safe-haven asset with liquidity.

g. Bonds

• Fixed-income securities issued by governments or corporations.
• Provides regular interest payments and capital protection.

h. Sukanya Samriddhi Scheme (SSS)

• Sukanya Samriddhi Scheme is a money investment plan that is backed by the Government of India.
• New parents can open a Sukanya Samriddhi Scheme account for their daughters up till the age of 10.
• The minimum deposit you have to make every year is Rs. 1000 and the maximum deposit in one year is Rs. 1.5 lakhs.
• You can deposit the money until your daughter is 14 years of age.
• The maturity period of this plan is 21 days or 3 weeks after opening the account.
• This plan offers an interest rate of 8.6% on buying annual investment plan basis.
• Sukanya Samriddhi Scheme offers tax deduction benefits of up to Rs. 1.5 lakhs in every financial year under Section 80C of the Income Tax Act, 1961. However, these laws are subject to change from time to time.

i. Unit Linked Insurance Plan (ULIP)

• Unit Linked Insurance Plan(ULIP) is one of the best money investment plans for new parents to invest in.
• This plan comes with a combination of investment and wealth creation. In other words, you can get financial security and invest in market-related stocks, such as bonds, shares, equity, etc.
• One of the key benefits of this money investment plan is that it offers great liquidity and high returns and helps you achieve your long-term and short-term goals.
• This plan provides high-interest rates and a lump sum amount of death benefits in case of unforeseen demise of the policyholder.
• You can claim tax deductions under this plan. This plan offers 1.5 lakhs of tax deduction benefits under Section 80C of the Income Tax Act, 1961. However, these laws are subject to change from time to time.

5. Work with a Financial Advisor

• Seek professional guidance to navigate nuances like college savings plans and retirement accounts.
• Start building a solid financial foundation for your child’s future.

Your Way Forward

You now know what the best money investment plans new parents can consider investing in to provide financial security to their child. Planning a financial security net will ensure that your child’s future is secure, and he can avail the best opportunities available. Moreover, in case you are not around to provide financial help to your child, he will not have to compromise on his education or dreams and can continue to live a life that does not involve any financial hassles.