There are many reasons why investing in your child is critical for every parent. For starters, it assures a better future for them. Secondly, if you invest in the name of your child or children, you won’t feel tempted to liquidate those investments.
Ultimately, having an investment outlay for your kids during their growing years will enhance their upbringing without burdening you with bills in the future. But if those weren’t enough reasons, here are three more reasons to invest in the name of your children.
1. Helps with Higher Education
It's no secret that attending premier institutions, be it in India or abroad, can be an enormous expense. But that shouldn't stop you from providing your child with a solid education. And you can if you start investing in them as early as possible.
The easiest way to keep money aside for your kid’s higher education is to open a minor savings bank account. Minor account opening online can be done instantly by visiting a credible bank's website, and you can make the first deposit digitally.
2. Promotes Tax Savings
Investing in your child can help you reduce your income tax while building a corpus for them. For instance, when you open a PPF account for your child, in addition to your PPF, you are eligible for an income tax rebate on both accounts separately.
This means you can claim the usual tax rebate of up to Rs. 1.5 lakh on each PPF account under Section 80C of the Income Tax Act.
In addition to opening a minor PPF, you can also invest in the Sukanya Samriddhi Yojana if you have a daughter. This will earn your girlchild a tax-free return of up to 7.6% until she reaches 21 years of age.
3. Cultivates Financial Responsibility
Want your child to understand the significance of money and how to manage it better? Well, then, you must give them avenues to save and invest money early on in life.
For instance, you can guide them to invest a part of the cash they receive from other family members or relatives during festivals and birthdays in FDs. This way, the children, too, will realise the corpus one can create by depositing only a small sum over the years.
Educating them on basic financial instruments and investing in those very instruments will let your children observe how investments generate funds to meet future life goals.
Many banks go the extra mile and allow minors to become debit card holders. Some even provide a chequebook and allow minors multiple methods of making transactions.
In the End
The bottom line is that investing in your children is an excellent move. No wonder the Indian government provides several tax-free fixed-return instruments for people of all ages. From PPF and NSC to fixed deposits and SGB, a minor can invest in every instrument with the help of their parent or guardian.
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