Saving for a child’s future is one of the most important aspects of financial planning for every parent. Children’s education is one of the biggest goals and the biggest cash flow for parents.
Every parent aspires to offer their children- sound education, a decent lifestyle, and most importantly, adequate financial security to pursue their dreams. The cost of education in India is rising at a fast pace and new-age private universities are charging between Rs.8 lakhs -Rs.10 lakhs per annum for undergraduate courses.
Many foreign universities are setting up campuses in India, which would have higher fees. The cost of education will continue to increase in the future. Nivesh helps you build a financial plan for your children’s needs in the coming years. Investors can easily plan for the costs they anticipate they will incur such as higher education, marriage, etc, through multiple child savings schemes and investment options. .
The corpus of education and wedding today is unlikely to remain the same after 10-15 years. Assuming that inflation will skyrocket, education expenses will go through the roof year after year. If you start investing early, you can easily achieve the desired results out of the investment. There are various child-saving schemes designed keeping in mind the long-term financial needs of the children. Also, these savings plans can beat inflation by providing higher returns. An investor should invest via SIP to benefit from the power of compounding.
Even if you start early and invest via SIP, it is essential to choose the right mutual fund. If your time horizon is more than 10 years, you can have a higher exposure to equities and less to debt. If your time horizon is between 5-10 years, you can invest in hybrid funds or blue-chip/ large-cap equity mutual funds. If your time horizon is less than 5 years, then you should play safe and have a higher exposure to debt-oriented mutual funds and less to equities.
After choosing the right mutual funds and investing via monthly SIP, you should also monitor your fund regularly. You may need to balance your portfolio from time to time, depending on the performance of various instruments in your portfolio and your financial goals.
When you are reaching towards your goal, you should slowly transfer your money from mutual funds, especially equity-oriented mutual funds to a safer avenue. This is because markets are volatile and you might lose out on your savings, just before you reach your financial goal. Therefore you must start a Systematic Investment Plan so that you can systematically transfer your fund equity funds to a safer investment option. This will safeguard your capital by the time comes around.
Parents are often unsure about how much money they should set aside as the fees for various courses such as medicine, engineering, arts, commerce, and science. The fees for these courses range between 3 lakhs to 15 lakhs each year. The right way to determine this amount is to account for the opportunities that parents want to give to their children, be it the best institutions in India or abroad. In addition to the fees, living expenses, and other expenses should also be accounted as well as adjusted for inflation. Your financial advisor can help you determine this amount.
If parents fall short of the goal amount, various affordable loans can be looked at, these loans wouldn't be a burden as the parents have done the majority of work by savings and investing wisely.
Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.
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