Earlier, the education cost, including school fees and tuition fees, was nominal. But over a period of time, the cost of education has increased, exponentially. Nowadays, it takes lifetime investments to build a secure future for children. It is because today schools and colleges are not just about studies. The emphasis is also on extra-curricular activities to help them become more confident in different fields, along with academics.
That’s why parents start investing early for the better future of their kids. If you’re looking for the best investment plan for children, it’s best to consider a fixed deposit (FD). FD is the most preferred/secure investment option, as it offers high returns with low risk.
How does FD work?
When you invest money in a fixed deposit account, you are setting a part of your savings to grow at a predefined interest rate. The current FD rates remain applicable throughout the tenure. The principal amount along with interest earned can be withdrawn on maturity. A fixed deposit offers lucrative interest rates and carries lower risk, assuring you of fixed returns.
Supposedly, you have deposited INR 2 lakh for around 60 months at a rate of 7.6%. On maturity, you will get a total amount of about INR 2,91,831. You can withdraw the money at the time of maturity or renew the FD for another tenure. Keep in mind, the longer the tenure, the higher is the interest rate you get.
Features of Fixed Deposit
- You get a higher interest rate on a fixed deposit compared to a savings account. Hence, FD is more profitable and helps in making your child’s future secure.
- Irrespective of the invested amount on FD, you are likely to get a guaranteed return on investment. Even market fluctuations won’t impact the returns on investment.
- The fixed deposit has a very flexible tenure. It varies from seven days to 10 years based on the customer’s needs or preferences.
- When you’re saving money in FD, you get guaranteed fixed interest rates and returns on the savings over a specific period.
- The customers get to choose the interest frequency as per monthly, quarterly or yearly basis.
- Investing in FD is easier. All you need to do is fill up some important details and the bank or NBFC representative will contact you for the documentation. Some NBFCs also offer doorstep services, which prevents clients from standing in long queues for opening an FD account.
- Your fixed deposit savings remain unaffected by market risks, so it’s a risk-free investment for your child’s future.
- You can take a loan against your FD, which means your investment remains unharmed during financial emergencies.
- You can begin with a small FD investment of about INR 25,000 or even less and grow your savings over time.
- You can even start a fixed deposit with your children or spouse. In this case, you need the signature of all FD holders to withdraw the FD amount.
The features accorded by an FD give you the option to invest money to ensure your children can choose a course of their choice.