With growing expenses, it’s important we make as much savings as possible for the future; at the same time, we should ensure our current life is smooth and we do not need to sacrifice for usual needs. I am not an expert in this area but here are few things I’m practicing myself.
Savings for self and spouse: Public Provident Fund (PPF) at a Nationalized bank or Post office would be good. Locking period of PPF account is 15 years (there is a provision of partial withdrawal at 10 years). Consider we deposit INR 5000 a month, it will become INR 9,00,000 in 15 years (5000 INR * 12 months * 15 years). This amount I have mentioned here is excluding the interest paid by bank. There will be exemption under Income Tax Act upto 1,50,000 INR per year. I have opened this account at State Bank of India and have been experienced that interest is paid on 31st March, every year.
For daughters: I found Sukanya Samridhi Yojna is an useful investment. This account can be opened for girls below the age of 10 years. Interest rae is 8.6%. Amount in this account can be withdrawn till 50% at the age of 18 years of child and 100% at the age of 21 years. In case child get s married between 18 to 21 years, then 100% of the amount can be drawn. This account can be deposited with minimum of 1000 INR and maximum of 1,50,000 per year. Parents can avail tax exemption under this account.
For sonsExcept insurance schemes, there are no special schemes for boys so what I learnt from a relative (Hema’s uncle) is that we can open a PPF account in Child’s name. Features of this account is same as individual PPF account.
Planning annual expensesSomething like school fee etc., would be annual expenses. One of the ideas I liked and started investing in is Fixed Deposit under Income Tax Savings scheme. These Fixed deposits are locked for 5 years and comes with tax benefit. So every year, we may deposit about 50,000 to 1,00,000 so when kids turn 5 years, we will start having these fixed deposits get matured every year. It would be good to make an arrangements that these funds get matured in the month of April so that we can use for school fee, little vacation and other expenses.
Please feel free to add any other ideas that you may have.