Kids are special. The baby’s smile can light up the parents’ heart, giving them a new purpose in life. While children make parents happy, parents also shoulder the responsibility of raising them and securing their financial future. Investing for your child’s future is one of the most thoughtful and strategic financial decisions parents can make.
Investments made for kids when they are young help build a corpus for them as they grow up. They ensure that funds required for education, marriage, and other life events are readily available through investments made in their name. Thankfully, various child investment plans that cater to different risk appetites and goals are available in the market.
Here’s a comprehensive guide to help you select the best child investment plans for your child.
Best child investment options to invest in 2025
With careful investing, parents can secure the financial future of their kids. As a parent, you should plan well to ensure that funds are available for their education, marriage, or buying a house.
Saving up, of course, is the first step. However, savings alone might not be enough as rising inflation, especially education inflation in India, will make higher education much more expensive than what it is today. As a parent, you need thoughtful planning and a good investment strategy to generate funds for your child’s higher education or other goals.
While investing for your kid’s future is a great idea, there is no magic age to start. In fact, investments for your infant kids can begin with newborn investment plans. You can start with small amounts and increase the investment amount over time as your income increases.
Here too, early birds have the advantage. If you start investing for your infant kids, you will have nearly 18 years of accumulation period. This means compounding will work its magic and even small investments can yield high returns as you have the benefit of time.
Kid’s investment space is gaining popularity, with several investment alternatives available for selection from child investment plans. Here are some of the best investment options for kids.
Bank Deposits – Fixed Deposit (FD) and Recurring Deposit (RD)
Bank deposits such as FDs and RDs are among the popular short-to-medium-term investment options for children, thanks to their assured returns and low risk.
• Fixed Deposits (FD)
Fixed Deposits are a widely favored investment option in India. Generally speaking, FDs become more attractive when equity markets are volatile and interest rates are high. 2025 appears to be a year of volatility, with equity markets experiencing a downturn and the RBI starting the economic easing cycle in the economy with the first rate cut announced in February 2025.
Booking an FD today for your child will help you lock in a higher interest rate for the tenure of the FD while also guaranteeing a fixed rate of return and assured maturity amount.
If your child is a teenager planning to start higher education in the coming 3-4 years, shifting the corpus to a bank FD could be the right move for you as an FD will remove volatility from your investment and make financial planning easy.
• Recurring Deposit (RD)
Recurring Deposits are low-risk investment alternatives that combine the regular nature of investment with fixed returns. RD involves depositing a fixed amount each month for its tenure. This is a disciplined way to save regularly while earning interest over a fixed period, making RDs a great way to build a corpus for your child over time.
RDs are offered by banks and post offices and are considered suitable for accumulating a corpus. They are ideal for parents who want to save a fixed amount regularly for their child’s future.
Child Insurance Policies
Child Insurance Plans are designed to protect the child financially if something unfortunate happens to the parent. These plans ensure the child has the necessary funds to pursue life’s goals, be it education or starting a business.
Parents can also opt for policies that provide a lump sum payout upon the policyholder’s (usually the parent’s) death. These policies also often offer periodic payments throughout the policy term until maturity to ensure regular cash flow. Such policies combine insurance coverage with investment opportunities to build a financial corpus to secure the child’s wellbeing.
Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a long-term investment option known for its stability and tax benefits. PPF has a lock-in period of 15 years, which enforces investment discipline. The long lock-in period is especially beneficial when investing for young kids.
PPF allows annual investments between ₹500 and ₹1.5 lakhs and the interest rate for the account is fixed in advance and announced by the government. The PPF rate of interest for 2024-2025 is fixed at 7.1%. The interest earned is tax-free, and PPF deposits are eligible for a tax rebate under Section 80C, up to a maximum limit of Rs 1.5 lakh per year.
Gold (physical and digital)
Investing in gold is a traditional, yet effective way to secure your child’s financial future. You can invest in physical gold through bars and coins, and digitally through gold ETFs or Sovereign Gold Bonds (SGBs). Though fresh issues of SGBs have been discontinued by the government, the already issued SGBs are traded on the exchange and parents can buy those.
Gold investments in any form serve as an inflation hedge. Gold is also a tangible asset that can be easily liquidated when required.
Mutual Funds
Mutual fund investments, especially SIPs, are widely accepted as a way to create wealth over time. When investing for minor kids, parents often have a time frame longer than 5 years or more. This makes SIP a great child investment plan for building a corpus for your child.
Moreover, mutual fund houses offer children’s mutual fund solution-oriented schemes designed for long-term savings. They have a five-year lock-in period or until the child turns 18. The lock-in period encourages discipline and wealth preservation over time.
Unit Linked Insurance Plans (ULIPs)
Unit-linked insurance plans offer dual benefits of insurance and investment. While the combination of insurance and investments sounds good on paper, ULIPs tend to eat up gains due to higher costs. Investment experts advise against ULIPs, insisting that insurance and investments should be kept separate.
Therefore, when investing for your child, you should opt for pure investments such as FDs, RDs, and SIPs and pure insurance products such as child insurance.
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana (SSY) is a government-backed scheme specifically designed to ensure the financial security of girl children. SSY is a great investment alternative if you have a daughter as it offers high returns with low risk. The scheme has a tenure of 21 years or until the girl child turns 18 and gets married.
The interest rates for SSY are announced every quarter. The interest rate for the 1st January to 31st March 2025 quarter is 8.2%.
SSY allows investments up to ₹1.5 lakhs annually and qualifies for tax benefits under Section 80C. The proceeds received on maturity or withdrawal are also exempt from income tax.
National Pension Scheme (NPS) Vatsalya
NPS Vatsalya, an extension of the National Pension Scheme (NPS), is a new entrant in the kids’ investment space. NPS is a long-term retirement-focused investment popular among salaried individuals in India.
NPS Vatsalya is designed for children, where parents can make regular contributions that can be used by their kids for their retirement. NPS Vatsalya can be considered for very long-term savings goals.
Here’s a summary of the key investment options discussed in this blog post, with their pros and cons.
| Investment Option | Key Features | Risk Level |
| Fixed Deposits | Guaranteed returns, low risk, tax benefits | Low |
| Recurring Deposits | Regular savings, fixed returns, low risk | Low |
| Child Insurance Plans | Financial protection, life cover | Low to Medium |
| ULIPs | Insurance + investment, market-linked returns | Medium to High |
| Public Provident Fund (PPF) | Long-term, stable returns, tax benefits | Low |
| Gold | Inflation hedge, tangible asset | Low |
| Mutual Funds | Diversified investments, potential for high returns | Medium to High |
| Sukanya Samriddhi Yojana | Government-backed, high returns, low risk | Low |
| NPS Vatsalvya | Government-backed, returns depend on scheme selection | Low to medium risk |
To sum up, the best investment strategy for your child will depend on your financial goals, risk tolerance, and the time frame available for investment. It’s advisable to consult with a financial advisor to devise a plan that suits your specific needs.
Conclusion
Choosing the best child investment plan for your kid in 2025 involves considering several factors, including risk tolerance, financial goals, and time horizon. Starting early is key, whether you opt for low-risk options like FDs and PPF, or market-linked investments like ULIPs and mutual funds.
Each investment type has its unique benefits, from tax advantages to the potential for high returns. Smart planning and diversification in investing can ensure a secure financial future for your child.
