Why fixed deposit is not good for child plan?

POSTED BY Sarav ON June 4, 2013 8:04 pm COMMENTS (3)

Hi Manish,

I am thinking of investing in FD for my child for future. But an article in economic times says, its not the best investment and does not return as expected. 

Can you put your views and suggest a way for best children plan.

 

 

 

3 replies on this article “Why fixed deposit is not good for child plan?”

  1. No instrument is good or bad. Only investment choices are good or bad.

    You can invest with FD or RD for any goal. Just that you must be clear about interest rate after tax and the post-tax maturity value for a given investment amount will be enough for your goal or not. Also your must realize that you need to factor in an inflation of at least 10% for such goals.

    If you are comfortable with all of the above then, “What do you care what others think?”

  2. bemoneyaware says:

    Fixed Deposits gives assured returns but interest earned is taxable as per your income slab.
    Interest on FD is less than the inflation. Due to inflation value of money decreases. So if you put 10,000 Rs in FD for 8% while inflation is 10% so in a year though you have earned money it’s of less value due to inflation. And if you factor in tax you loose out more.

    Popular financial literature says that in long terms equity can beat inflation so for child plans which is of long duration it is suggested to invested in equity and not Fixed Deposit.

    FD, Equities all have a place in the investment plan just like auto,train,bus,aero-plan each of them has place in planning a trip. You need to come up with your own personal financial plan and see what suits you FD, Equities or mix, popularly called as Asset Allocation or Diversification

    Our article Investing:Think about Liquidity,Safety,Returns,Risk,Tax discusses it in detail

  3. Dear Sarav, do you want to invest only once or invest regularly?

    Please clarify.

    Thanks

    Ashal

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