Saving money for childbirth? You may invest in these instruments

Childbirth is one of the biggest financial tasks for many. It includes pre-delivery, post-delivery as well as related expenses like those on customary events and future planning. A pragmatic plan before childbirth makes bringing them up easier. Certified Financial Planner Poonam Rungta told Zee Business Online that parents should start planning three-four years before child birth, as they have to accumulate funds for many things.

This includes funds for child delivery, post-delivery, other expenses, organising events, and also, working mothers should accumulate funds equal to six months' salary amount. Rungta said that parents should also take adequate insurance cover for the family and they should take the policy which offers maximum maternity benefits. 

If the insurance policy is taken three-four years prior to the childbirth then the maternity benefits may be more, she said. But, parents need to understand that childbirth is just the first step, they also need to raise money to fund the future need of their children.

How to invest for children?

Rungta said that if it is a girl child, parents may buy Sukanya Samriddhi scheme, which is specially designed for girls. They can also invest in PPF or in mutual funds. For a male child, equity mutual funds are the best instruments. Mutual funds have the ability to beat the inflation, she said. 

Virendra Ranawat, CEO of MySIPonline, explained, "After a child's birth, expenses are many, therefore, one has to do everything according to plans. For the shot-term plans, one may invest in debt mutual funds or liquid funds, while for the long-term investments, parents should take equity funds. They have to invest to make corpus to meet the future goals like child's education, marriage, and other expected expenses." 

Shweta Jain, independent CFP, said, "Best way to save money is through investing in mutual funds. In the past 10 years, the average inflation on raising a child has been 6 percent, whereas the major equity indices have witnessed an annual growth of about 12 percent. Therefore, by making timely investments not only generate inflation-beating returns but also they offer liquidity."

How to start investing in mutual funds?
While the mutual fund may seem the best possible way to invest and grow your money, they come with a certain risk. So, it is important to understand the funds before investing the money. Amit Kukreja, founder of AmitKukreja.com  and a SEBI registered investment advisor, suggests that if parents do not have prior exposure to mutual funds, they should start with less risky debt mutual funds.

"As the investment horizon is long (18 to 20 years), parents should invest in equity mutual funds. If parents have no experience or understanding of mutual funds, they should start with less risky debt mutual funds. However, debt funds should be AAA rated. Gradually, they should start investing in hybrid funds, largecap funds and multi-cap funds to make maximum corpus," he said.