Investment planning for children: How to choose the right investment option to secure your child's future
While Joshi started early, the vehicle he chose to reach his destination was not quite appropriate. He bought a traditional life insurance policy to save for his son’s education. For an annual premium of Rs.80,000, the policy covers him for Rs. 8 lakh and will start annual payouts when Swaraj turns 16. The returns work out to less than 6%. “Traditional insurance policies are not the best investment. They usually offer very low returns,” says Rohit Shah, Founder and CEO of GYR Financial Planners.
Choosing the wrong investment is a common problem. It becomes even more acute while saving for critical long-term financial goals such as children’s education and weddings. Going for the wrong investment option could leave you with a shortfall in the target amount and jeopardise your planning. A study by financial planning firm, Finsafe India, shows that one out of three investors do not know where to invest. “This indicates a strong need for better financial education and investment guidance,” says Mrin Agarwal, Founder and CEO, Finsafe India.
Take professional advice
Many of the challenges faced by investors can be avoided if they take professional advice on investments and finances. If they are willing to pay, a good fee-only financial planner or a registered investment adviser will be able to guide them better. Unfortunately, most investors don’t want to pay for advice because they can get it for free from a relationship manager or an insurance agent. However, this free advice often turns out more expensive than the
