The 12-15-20 investment formula can make you a millionaire!
What is the 12-15-20 formula of investment? How does the 12-15-20 formula work? Which investment will give strong returns? How much of your income must you save?
If you had a new young member in the family, it would be prudent if you start investment planning for him/her right now. Money9 gives you a 9-point investment guide, where you can grow your money to secure the child’s future. The sooner you can start investing, the easier will it be to build a bigger corpus. What follows is a list of secure, balanced as well as equity-based investment instruments. You can invest according to the risk appetite, financial capacity, and the corpus that you are planning to build for your child.
Fixed deposit
It is widely known as a safe and secure investment option. The return is low but the degree of uncertainty is negligible. Opening a fixed deposit is easy and every public and private bank offers this facility. Currently, fixed deposit rates range up to 6%. Small finance banks and some lesser knows private lenders offer rates between 6% and 7.5%.
Recurring deposits
If you are looking for a very low-risk and periodic investment plan for your child’s future, you can consider recurring deposits. The interest rates vary between 4.5% and 6.5%. Recurring deposits are offered by both banks and post offices. For example, an investment of Rs 1,000 per month can fetch you almost Rs 2 lakh after 10 years. RDs are also offered by all private and public lenders.
Mutual fund SIP
Mutual funds offer good, inflation-beating, and relatively stable returns. One can start with only Rs 500 per month and can invest for decades. Besides one can choose funds according to one’s goals. There is a wide array of funds to suit different needs and tastes.
SIP allows investors to reap benefits that are greater compared to the investment costs. One can start investing from the first month of one’s kid till he/she attains the age of 18 or 20 years. And your wise investment decision can easily gift him/her not less than Rs 1 crore.
Sukanya Samriddhi Scheme
The Sukanya Samriddhi Scheme (SSS) is an Indian government initiative that encourages parents to save for their girl child. The account can be opened at any post office till your daughter attains the age of 10 years.
The minimum deposit is Rs 1,000 a year and the maximum deposit is Rs 1.5 lakh. It bears an interest rate of 7.6%.
The deposits can be continued till your daughter attains 18 years and the maturity period of the account would be 21 years from the day of the opening of the account.
PPF
If you are looking for a long-term and secure investment plan, choose a minor PPF account where the funds can be safely locked in for a period of 15 years and more.
A maximum of Rs 1.5 Lakh can be invested per annum and the rate of interest is 7.1%. Minor PPF accounts can be opened through banks or post offices. Besides any one of the parents can get the tax benefit if not having any PPF account on his/her own.
ULIP
Another most affordable type of investment is a ULIP (unit-linked investment plan) which offers the dual benefits of insurance coverage along with investment. Under ULIPs, one can choose from a wide range of funds to invest in, such as equity funds, money market funds, hybrid funds, debt funds, etc.
Additionally, the person can get a death benefit too. Since ULIP is market-linked, the return is high yet risky. ULIPs are another option for a long-term investment, like 10-12 years or more.
NSC
NSC or National Savings Certificate is a proven method of saving for your child’s future. National saving certificates can be bought for a period of 5 years and they can be reinvested on maturity.
The present rate of interest offered is 6.8%. One can buy a certificate with is as little as Rs 100. There is no upper limit of investment but you can get tax benefits for a maximum amount of Rs 1.5 lakh a year.
Term insurance
When it comes to the issue of your children’s future, a term insurance policy of both you and your spouse is no short of a necessity. Under a term insurance policy, your dependents will be provided with a sum assured death benefit in the event of your untimely demise.
Minor children can also be named as beneficiaries under a life insurance policy. Generally, a term insurance cover of Rs 2 crore has a premium of around Rs 22,000-Rs 26,000 per year.
Endowment policy
Endowment plans are more or less like life insurance plans, the only difference being that they also allow you to make some investment along with life cover over a specified time period. If the life-assured individual survives the policy term, they will receive an assured lump sum maturity along with some periodical payouts.
If the policyholder dies before the policy matures, the sum assured maturity amount will be provided to the beneficiary. Besides, a regular payout will be given to the nominee in such an unforeseen situation.