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Investment Plan For 0-2 Years Of Age

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Vanshika Mangla
a month ago
Family
0-2
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Welcome to Parenthood. Your role as a parent will bring about some big challenges in your life which include emotional as well as financial demands. But If you have just got married and planning a baby after a couple of years you have enough time to save.

Considering the rising medical costs, it would be prudent to put away a small amount every month in Liquid funds as these are the debt funds primarily suitable for putting money aside for short term and for emergencies. These funds have primarily near zero risks of loss if you invest for at least one month, like Aditya Birla Liquid fund, Axis Growth Fund, Nippon Liquid Fund right after you decide to have a baby.

Every parent aspires for a first baby function to honour the arrival your little one, his/her good schooling and yes! higher education is also a concern. Here is how you should invest for the immediate and distant goals for the child:

Goal and time horizon

Goal value ( Assumption)

Investment tools

Baby Function ( 0-2 years)

2 Lakhs

Liquid Funds, FD

Start School (4 Years)

2-4 Lakhs

Debt Funds , FD, RD

Higher Education (18-20 Years)

60-70 Lakhs

Equity Investments, PPF, Sukanya Samriddhi yojana

Looking at the brief review of these investment options, you can get an idea to plan for your own portfolio.

Debt Funds are the safest mutual funds that primarily invest in fixed income securities like bonds and treasury bills; these are relatively stable investments that could help you generate wealth.

The best way to enter the market is through SIP (Systematic Investment Plan). Investing in a debt fund with a SIP of Rs 6000 per month for 4 years, you can accumulate Rs 2.88 Lakhs. At an average return of 7%, it comes out to be 3.31 Lakhs. At the lowest return of 6%, it comes out to be 3.25 Lakhs. At a return of 8%, it is 3.38 Lakhs. In the entire three instances, you are able to make up your short term goals with negligible risk. Some of the best performing Debt funds are Mirae asset dynamic Bond Fund, SBI magnum Gilt fund, DSP Government securities Fund and many more…

Fixed Deposits are the type of term deposits that gives you a fixed rate of interest until maturity, it offers a higher rate of interest compared to a regular savings account. You can choose the tenure as per your convenience of your FD can be as low as 7 days.

Moving towards long term plans investing of about 60-70 per cent in Diversified Equity Investments are the best asset class when it comes to long term plans as these investments tend to give returns like no other of approx. 16-17%. The same can be achieved by investing in Equity mutual fund of various Fund houses (Axis, UTI, HDFC etc.) and in different sectors (Technology, Financial, Pharmaceutical). Considering an example, the monthly SIP instalment of Rs 5,259 accumulates to Rs 11.36 in 18 Years. However, by investing in equity at an average rate of 16% it comes out to be Rs 65 lakhs. This is how compounding works and little things can make a big impact.

Investing the 20-30 per cent into the Public Provident Fund (PPF) backed by the government provides tax-free guaranteed returns of approx. 7-8% under section 80C of the Income-tax act over a lock-in period of 15 years is also a sound option. The PPF account can be opened with either Post Office or with any Nationalised Bank that allows a minimum investment of Rs500 to maximum Rs1.5 lakhs made in a lump sum or in instalments.

Sukanya Samriddhi Yojana is a viable option for a girl child which can be opened in Post offices and in any designated private and public banks offering 8-8.5% interest rate. Your girl child should be less than 10 Years at the time of account opening.

So parents, take advantage of your productive years, Diversify your quality investments and start investing…

Stay Tuned, Stay Relevant!

 

This article has been reviewed by our panel. The points, views and suggestions put forth in this article have been expressed keeping the best interests of fellow parents in mind. We hope you found the article beneficial.
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