Ways to Save Money for Kids

Discover effective methods to save money for your child’s future.
Save Money for Kids
4 min
31-May-2024

Teaching children about money management from a young age is crucial for their financial well-being and future success. Instilling the habit of saving can empower them to make informed decisions, achieve their goals, and avoid financial pitfalls. However, it is not always easy to make saving fun and engaging for kids. This guide will explore various strategies to help parents instill the value of saving in their children and set them on a path toward financial responsibility.

This highlights the need to save money for kids, and most parents start searching for investments options even before the child’s birth. This financial security help your kids to face the world without trepidation and gives them the confidence to pursue their dreams. Additionally, as parents, setting aside a significant corpus to fund your child’s education reduces stress and allows you to relax during your golden years.

You can choose from several investment options, comprising flexible premium payments and varying risk profiles, to create a financial pool. This pool can also act as a safety net for you if the need arises. As you plan for your kids future, remember that fixed deposit can be a valuable investment option.

Pro tip

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How to save money for kids

Saving money for your kids warrants financial discipline and finding the best investment avenues that provide decent returns. This will ensure that over the next 15-20 years, you will accrue a corpus that is enough to fund your child’s education, along with covering expenses related to their extracurricular activities and medical expenses. While searching for the best investment options, you will also come across government-led programs which guarantee consistent and relatively risk-free returns.

Let us now examine a few investment options, including gold investments, mutual funds, and relatively safe options such as fixed deposit.

1. Government-led investments

  • Sukanya Samriddhi Yojana (SSY): This government scheme is exclusively for the girl child, offering attractive interest rates and tax benefits. It can be opened for a girl under 10 years old and matures when she reaches 21.
  • Public Provident Fund (PPF): A long-term savings option with a 15-year lock-in period, PPF offers tax-deductible contributions, tax-free interest, and a tax-free maturity amount. It's a safe and reliable way to build a substantial corpus for your child's future.
  • National Savings Certificates (NSC): NSCs are fixed-income investments offered by post offices. They have a fixed tenure of 5 years and offer a guaranteed return with tax benefits under Section 80C.

Also read: How to invest your EPF savings

2. Gold investments

Gold has traditionally been a symbol of wealth and security in India, and it can serve as a valuable asset in your child's financial portfolio. You can invest in gold through Gold ETFs or Mutual Funds, which offer the convenience of trading on the stock exchange without the need for physical storage. Sovereign Gold Bonds (SGBs) are another option, issued by the government with a fixed interest rate and the potential for capital appreciation. However, if you prefer tangible assets, you can also consider buying physical gold in the form of coins or bars.

3. Mutual Funds

Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets. They offer a variety of options based on your risk tolerance. Equity mutual funds can provide potentially higher returns over the long term, making them suitable for investors with a longer investment horizon and higher risk tolerance. If you prefer a safer option, debt mutual funds offer relatively stable returns by investing in fixed-income securities. Alternatively, hybrid mutual funds combine equity and debt, balancing risk and return.

4. Fixed Deposits (FD)

Fixed deposits offer a stable and predictable return with minimal risk, making them ideal for conservative investors. Bank FDs are a common choice, providing a fixed interest rate for a specified tenure. Bajaj Finance Fixed Deposits, in particular, offer competitive interest rates and flexible tenure options, making them an attractive option.

Also read: Short-term investment plans with high returns

How can kids save money?

Teaching children to save money is a valuable life skill that sets them up for financial success in the future. Here are some effective ways kids can start saving:

  1. The Piggy Bank: This classic method is a great starting point for young children. It provides a visual representation of their savings and makes it tangible and fun.
  2. Savings account: Consider opening a savings account for your kid at a local bank or credit union. This teaches them about banking and the concept of interest.
  3. Allowance: Giving kids an allowance, even a small amount, provides a regular source of income they can learn to manage. Encourage them to save a portion before spending.

How much should I save for my kids?

The amount you should save for your kids depends on various factors, including:

  1. Your child's age: The younger your child, the longer your investment horizon, allowing you to potentially take on more risk for higher returns. If your child is older, you might want to focus on more stable investments with a shorter time frame.
  2. Financial goals: What are you saving for? Education, wedding, or a down payment on a house? Different goals require different amounts of savings and investment strategies.
  3. Future expenses: Estimate the future cost of your goals, considering factors like inflation. For example, education costs are rising rapidly, so you'll need to factor that in.
  4. Income and expenses: Consider your current financial situation and how much you can realistically save each month.

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator

Systematic Investment Plan Calculator

Fixed Deposit calculator

SDP calculator

Gratuity Calculator

Lumpsum Calculator

Step Up SIP Calculator

Sukanya Samriddhi Yojana Calculator

Public Provident Fund Calculator

Brokerage Calculator

MF calculator

EPF Calculator

RD Calculator

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Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.