A fixed deposit is a great way to save money. It has long been the preferred saving option for Indians, who open fixed deposits for various reasons. While some park their savings in an FD, others save for more specific financial goals. Among them, a common goal is the financial well-being of their children. Many people invest in fixed deposit to ensure their children have a corpus throughout their life. If you too are planning to save for your child’s future, opening a fixed deposit might be a good idea. Read on to know more.
Ways in which a fixed deposit help secure a child’s future:
Here are some ways in which a fixed deposit can benefit your child:
1)Saving for his education –
Parents open an FD for their child’s future. They lock in a suitable sum of money. With time, the yields and compounded interest make the fund grow, and the fixed deposit becomes larger. The child can utilize the amount later on when he pursues his higher studies.
2)Saving for his marriage –
Everyone dreams of having a lavish wedding for their children. If you plan and invest in a fixed deposit today, you can use the returns from its years later and have the most lavish wedding for your precious children.
3)Saving for his entrepreneurship –
You can also invest a certain sum of money in a fixed deposit and let it grow. In about two decades, when your child is ready to start his own business, he can use the fund to do so easily.
These are the most effective ways in which a fixed deposit can aid a parent’s financial roadmap for his or her child.
Points to remember before opening a fixed deposit for your child
Before you open a fixed deposit for your child’s benefit, here are some points for you to remember:
- Consider multiple fixed deposits – Rather than opening a single fixed deposit with a large sum of money, open multiple fixed deposits. Have different tenures for each so that you can use them at different stages for your child’s benefit as he grows.
- Explore the loan option – If you ever need to liquidate your funds to meet an emergency, do not make premature withdrawals. Instead, opt for a loan against your fixed deposit. The fund will continue to work in your child’s benefit, while you meet your financial requirements too.
- Get the tax benefits – If you invest in the tax-saving fixed deposits, you can save a lot of your tax money as well. You can earn some handy tax benefits while easily securing your child’s future. But do remember, but a tax saving fixed deposit is for a duration of five or more years, so you must do your math and invest accordingly.