India is gearing up to celebrate Children's Day on November 14 and the best way for parents to celebrate the day would be to plan for their future so that their children can realise their dreams.
Rising inflation makes future financial requirements for a child such as education, extra-curricular career goals and marriage more expensive. Hence, it becomes important that parents plan for their children’s future needs early on and give sufficient time for these investments to grow.
A research by Aditya Birla Sun Life AMC shows that school fees, tuition fees and other associated expenses has risen by 150% in the last 10 years. Average annual expenditure on private schooling has risen by 175% in the same period, while the cost of professional and technical education has gone up by 96%.
How to plan it?
Various surveys show that even as parents plan for their children’s future, they miscalculate the cost of future financial requirement and do not choose the right investment option. Many parents opt for traditional avenues with fixed return instruments, which offer suboptimal post-tax returns.
Considering the nature of returns and time-horizon required to plan for a child’s future, equity mutual funds can be a good option. Among equity funds, there are certain solution-oriented equity funds that are specifically designed for children’s future.
In this regard, Aditya Birla Sun Life Bal Bhavishya Yojna can be a good choice. It has a lock-in period of minimum five years or until the child turns 18 (whichever is earlier). This ensures that the investors do not take the money out in case of short-term volatility in the market. Consequently, it encourages a disciplined long-term approach towards investment, particularly as the corpus is to be used for a child’s future needs.
Investments can be made only in the name of a minor who is less than 18 years at the time of investing. Her parent or legal guardian would represent the minor until she becomes a major. The fund comes with a unique proposition where entities other than parents can invest for the beneficiary, who is a minor. These entities can be grandparents, close relatives or non-individuals such as trusts and corporates. Any investment from a non-specified relative is treated as a gift to the minor.
Under Aditya Birla Sun Life Bal Bhavishya Yojna, upto 65-100% is invested in equity-related instruments with the balance in fixed income securities. With a Multi-cap orientation and focus on building a diversified portfolio of quality companies across sectors and market cap, the fund has a bottom-up investment style focusing on companies selected through fundamental research.
