An increasing number of Indian parents is doing that today. In an online survey conducted by economictimes.com for ET Wealth last week, 63% of the 1,908 respondents said they started saving for their children’s education when they were born. Another 9.2% had started even before the kid was born (see graphic).
That’s good news, because the earlier you start, the more the time available for your investments to grow, and the bigger the quantity.
But are Indians choosing the right options when investing for their children? Here’s the bad news. An overwhelming majority is opting for low-yield instruments. Almost 45% of the respondents in our survey said they invest in the Public Provident Fund (PPF) and fixed deposits for their children.
Another 38% have invested in conventional insurance policies. “Despite the numerous options available, Indian parents continue to rely on bank fixed deposits due to lack of awareness,” says Ashu Suyash, country head, Fidelity International.
The encouraging part is that 43% also invest in equity mutual funds and stocks for their children, while 26% have opted for child insurance plans that provide for the education of the child if the parent is no more.
The skew towards low-yield products also means that many Indian parents might fall short of the targets they have set for their children’s investments. ET Wealth estimates that raising a child in urban India from cradle till college costs roughly Rs 55 lakh.
Source: [Economic Times]