Financial goals and investments give life a better perspective for the future especially if it is about providing a better tomorrow to your little angels.
As Parents, you leave no stone unturned to give your wards a stable future. Thoughtful and wise investments play a vital role in securing our kid’s future. Investing in the name of your minor kids could be a safe bet.
As children grow up, they would need money for their higher education, for a dream wedding, or for a good home.
If you are confused about whether to make these investments in your name or your children’s name then this blog might come in handy to solve all your queries about investing in minors’ names.
Studies and previous real-life experiences have shown immense benefits of investment in the minor’s name. Hence you too can take your share of benefits in the process.
How to Invest in Minors name?
The foremost step is to open a bank account in the name of your minor child. Investments must be made via these accounts. The redemption proceeds are credited to this account.
Benefits of investing in a minor’s name:
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Developing a Habit Of Saving
Make your child responsible from the very beginning when it comes to finances. We, parents, must Let our child acknowledge their savings accounts and their purpose. This initial step makes children grasp responsibility for finances and a career-oriented lifestyle.
Make them learn the habit of saving and realize the fact that funds collected over a period of time are to be used for purposeful life events.
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Parents Can Save on Income Tax
There is a huge benefit for the parents in the process such: as Tax efficiency increases if the investment made is under the name of a minor. The tax liability ranges from nil to very nominal for the minor holder’s investment.
One major advantage is after turning 18, your child will be in a lower income tax bracket than a parent or guardian.
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Lower Liquidity Chances
It has been experienced that, in case of emergencies, we parents are highly hesitant in withdrawing the amount from funds kept under our minor’s/ child’s name. It is seen that these are used mainly for our child’s financial goals only. We, parents, work double shifts and overcome difficulties but do not risk the investments we have made in the name of our children.
Due to the attachment involved for many years and the dreams associated with it, it is highly unlikely that we parents/ guardians take a step towards liquidity in the investments made under our minor child’s name.
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Kids learn discipline with SIP
Parents must take up the essential topic of life. We must teach about SIP to our children so that when they start their careers they follow in the footsteps of their parents and realize the importance of deduction from their savings account.
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Enhances kid’s Financial Responsibility
Parents/guardians regularly separate a certain amount of money from our monthly salary and income for funding in our minor child’s account. It is essential that kids contribute their share too. Kids can use their festive monetary gatherings to invest in their existing accounts. Hence teaching them the practice of saving enhances their financial responsibility.
Watching and following in the footsteps of parents, this practice teaches our kids thoroughly about saving and investing with experience over the passing years.
Schemes and Platforms where you can Invest in Minor’s name
Public Provident Funds
For parents, opening a PPF account in your minor child’s name is beneficial to a great extent. A wholesome amount of INR 1.5 lakhs amounting to a tax deduction and contribution to the PPF account if it’s opened in 2 different accounts under the name of the minor child and the parent/guardian. This is clearly mentioned in section 80C.
Note: This happens because of the EEE (Exempt-Exempt-Exempt) status of the PPF hence the interest is non-taxable.
Sukanya Samriddhi Yojana.
If parents are blessed with a daughter child, it is advisable to invest in Sukanya Samriddhi Yojana. The Indian Government has given a major facility of a tax-free return of 7.6% until the girl child reaches the age of 21.
Mutual Funds
As parents and guardians making a mutual fund investment or choosing any other way to invest in your minor’s name, is an essential task to make those dreams of lavish weddings, and higher education at foreign universities come true for your child’s stability and luminous future.
After all, it is a slow and gradual process of cumulating hard-earned money with better interest both in monetary as well as desired goals for oneself and your precious child.
To wrap it up!
When it comes to investing, nothing pays off more than educating oneself with market analysis, tips, and tricks. Parents/guardians of anyone who decides to take a step towards investment must necessarily research and analyze before making any investment decisions.
We know that it is difficult to find a trustworthy financial advisor who would help you safeguard your child’s future.
So a quick tip in this regard is mentioned below:
The foremost step towards choosing the ideal financial advisor is to look for these 2 certificates/ signs to gain the confidence that your child’s future will not be jeopardized and that the investments give high returns:
- Certified Financial Planner or CFP
- SEBI Registered Investment Advisor or RIA
To learn more about long-term goals via making investments under the minor’s name contact our expert financial advisors and know deep insights into the investment journey.
