Parents usually have a list of goals to be achieved. And given that parents wish the best for their children, they rank child’s education high on their list of priorities. That’s why it’s critical for families to draw up resilient financial planning so they can provide their child with a shining future. Good news - help is at hand!

Importance of Saving for Your Child's Future:

Saving for your child’s future is one of the important goals. This is mainly for two reasons:

• Times are getting increasingly competitive, and a solid degree is critical for your child’s progress in life
• Cost of education is rising sharply and failure to plan for it may deprive your child of the college of his dreams

Why mutual fund Investment is the best option?

Saving money for child’s education via mutual funds is among the most convenient ways for parents, to secure their child’s future.

Mutual funds offer an edge over other investments mainly due to benefits like:

• Liquidity - Entering and exiting your mutual fund investment at will
• Professional fund management - There is a team of experts on stock markets, managing the fund
• Diversification - Mutual fund portfolios own stocks and sectors and even multiple asset classes
• Tax benefit - Under sections like 80C

How to invest in mutual funds?

An easy and investor-friendly method to invest in mutual funds is via SIPs or Systematic Investment Plans.

With SIPs, investors set aside a fixed sum at periodic intervals (weekly, monthly and so on) in a mutual fund scheme of their choice. Money is transferred seamlessly from investor’s bank account to the mutual fund scheme.

SIPs help investors to negotiate market volatility better than one-time lump sum mutual fund investments.

They are also helpful with ‘rupee cost averaging’ i.e., buying more mutual fund units when the Net Asset Value (NAV) is low and buying fewer units when the NAV is high.

Investors planning to save for their child’s future, can maximize gains from stock markets via SIP route.

Types of mutual funds to secure your child’s future:

Parents should select a mutual fund investment that is in sync with their risk profile, investment tenure and supplementary goals like tax-saving (combined with their child’s education).

The best mutual funds to invest for child’s future include:

• Equity funds - These are pure equity funds, well-suited for parents with risk appetite. Returns are in line with higher risk.
• Hybrid funds - These funds invest across equity and debt investments so risk level is relatively lower compared to pure equity funds and if it suits parents, they can select hybrid funds. Returns are moderate compared to pure equity funds.
• Tax-saving funds - These are effectively pure equity funds, only difference is that they offer tax benefit under Section 80C, they are suited for parents with higher risk appetite looking for tax-savings in the same investment.  

It must be noted that best mutual funds to invest vary from parent to parent and there is no one size fits all when it comes to mutual fund investing.

While saving for child’s future can be a challenge for most parents, there is a hope in the shape of mutual funds. With various types of mutual funds appealing to parents with varying risk profiles and goals, planning for child’s education is now a lot more convenient and achievable.