ow to plan for your Children’s Financial Future??
Rabindranath Tagore said, “There are some things which we cannot buy. One of such things is Childhood.” As a parent or guardians, it’s our responsibility to safeguard and provide our kids with adequate resources to help them embrace their childhood thoroughly and unfold the magic within them. Often, most of the things in this journey are associated with money and protection. So, let’s get to know what are the steps needed and how to take them to plan for the child’s future.
# Cover yourself first: The first step in protecting your child’s financial future is to take adequate insurance for yourself. This cover must include the child’s day-to-day expenses, present and future educational needs, and other related expenses. The idea is to make the child and the family live the same life even in the absence of the bread earner.
# Start early: Education in India has never been this expensive as it is today. Earlier, people needed to save for a child’s higher education or education in abroad. But today, affording basic schooling has also become a luxury for many parents. Start saving and investing for child as soon as you have one. SIPs in Mutual Funds are a very useful tool for this purpose. So, INVEST NOW.
Why should you start early?: Let us take an example
| A | B | |
| Amount Invested monthly | 10,000 | 15,000 |
| Kid’s age when investment started | 1 | 10 |
| Investment till kid’s age of age | 25 | 25 |
| Assumed Rate of Return | 15% | 15% |
| Value at the end | 3.28 Cr | 1.1 Cr |
Time which plays an important factor. Time provides the advantage of compounding. Starting early even though with a smaller amount has a very good impact on overall corpus than starting when the child is a bit older.
# Liquidity is also a concern: Apart from investing for the long term, keeping adequate liquidity to meet near terms goals is also crucial. You cannot ask a college to delay exams for 2 to 3 months as you have to sell land and pay for it and you are not able to find a buyer. Parking funds in liquid instruments for near-term payments is a great strategy to overcome the crisis. STPs, SWPs which are available through Mutual Fund Investments can be used for this very purpose.
# Education Inflation is real: On average, education inflation in India is around 8% to 10%. To beat this, it is necessary to make provisions for the same. Incorporate education inflation in calculating future educational needs as well as in insurance coverage estimation. Plan and invest accordingly to nullify its effects.
Everyone would want their child to receive the best education from the best institutions. It is necessary to make arrangements for the same too. The Average cost of education of popular courses in the country at present are as follows:
- MBA- 20 Lacs (Top tier colleges)
- Engineering- 10 Lacs
- Designing Courses (Fashion and Interior) – 12 Lacs
- Law-15 Lacs
- Medical – 50 Lacs
With newer avenues opening and a lot of new courses coming up, the options are abundant. As a measure of security and peace of mind, it is always better to start investing so that no last-minute hassles take place.
Conclusion:
In short, “The early bird catches the worm”. Start early, make a plan, use realistic calculations, determine future needs, make a budget, start investing, and ta-da! You reach the goal.
Teach children to control money or the money starts controlling them. Teach them the value of things, not price. Teach them to be happy, not rich. And most importantly, let them live their childhood to the fullest. This Children’s Day, let us take a break, spend time with them and appreciate how fascinating they are!!!!