Saving for you child’s future is important in order to meet all his/her needs like education and marriage. And just like savings for any other purpose, starting early can give good results in the long term in the case of savings for your child’s future. Unlike savings for your own future, saving for your child’s future should be approached differently as their needs too are different. Below are the different ways in which you can save for your child’s future:

Children’s Insurance Policies

Misselling of Insurance Products

Children insurance policies aid in the building of savings that can be of help for the child’s education, health, and other needs. Just like general insurance policies, children’s insurance policies also come in different types like endowment and unit linked policies. A big disadvantage of children’s insurance policies is the high rate of expenses charged each year for the maintenance of these policies. Long term returns of unit linked policies are also linked to market conditions which keep varying.

Children’s Mutual Funds

Mutual Funds

All major mutual fund companies offer special funds for children. These funds typically invest in both equity and debt in varying proportions. A special feature of these funds is that they have higher lock-in periods when compared with regular funds (up to 3 years). Investors also have the option to lock-in the money invested in these funds till their children achieve majority. The longer lock-in periods of these exclusive funds aimed at the future of children act as a deterrent from premature withdrawals. An advantage of children’s mutual funds over insurance policies is that the amount saved in these accounts can be shifted to another fund, if the returns are lower.

Minor Accounts with Banks

Kiddy Bank

All major banks offer special accounts for minors. The only requirement is that one of the parent should be the guardian of the account. The child on whose name the bank account is opened can’t operate the account on his own. Minor bank accounts are a good way of keeping aside a small amount for the future of the child.  Apart from the savings that will be accrued over a period of time, minor accounts will also inculcate the habit of savings among the children.  Once the minor reaches the age of majority, there will be no need for a guardian to run the account and the account will be completely transferred on to the name of the minor. But  a major downside of this option is that the interest rates paid on the savings are very low.