Do You Need Dedicated Children’s Mutual Funds To Plan Your Child’s Future?

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Introduction

As parents, we want the best for our children. We do everything to set them up for success. And towards that objective, saving for child is generally the aim of every parent.

A tried and tested investment to build a corpus over time is through mutual funds. And as a good bet for the long term, mutual fund SIPs that are earmarked as children’s plans have been known to provide for many financial goals such as a child’s education or marriage and others.

Understanding children’s mutual fund plans

As a mutual fund investment type, a dedicated child plan or a child future plan is typically a hybrid mutual fund scheme. These funds aim to build wealth over a period, and hence can be ideal for long-term investors.

If you are looking to build a sizable corpus to meet your children’s future goals, including marriage, higher studies or education, it can help to invest in a dedicated child plan.

Planning for career possibilities

A well-diversified portfolio can ensure that your corpus remains stable and you receive good yields even when markets are volatile.

Given the rising cost of education, it can get challenging to manage finances in the future. This is why financial experts recommend SIPs as a mode of investing in mutual funds to reap long-term benefits.

SIP stands for systematic investment plans. As a mode of investing in mutual funds, SIPs are regarded as an ideal way of investing your money, in small amounts, periodically.

When you invest via SIP, your investment is channelled in the stock market to help you generate returns. Unlike a lump-sum investment, SIPs can help you spend your money and divide your finances over time. It can help you meet your financial goals and secure your child’s future.

Let’s look into some essentialfeatures of a child plan. These are:

  • Child plans are typically long-term investment schemes.
  • Such plans typically fall under hybrid funds or balanced mutual funds.
  • These plans invest in a combination of instruments, debt and equity fund.
  • Generally, they have a lock-in period of five years, or until the child turns 18 years.
  • Since long-term goals for children such as education or marriage could be well ahead in the future, dedicated child plans may have a higher exit load compared to other mutual fund schemes. This is to discourage early withdrawals.
  • Child plans do not offer tax benefits.

Conclusion

The main aim of investing in a child plan is to build an income by investing in money-market and debt instruments. Through long-term capital appreciation, you could achieve your financial goals to safeguard our child’s future. However, you may want to note that no mutual fund scheme offers asurety or guarantee that the investment purpose of the scheme will be accomplished.

Hence, if you are looking to invest in mutual funds for your child, you may want to understand what is a mutual fund and research on the various child plans available in the market to decide on the best option.

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