Child Investment Planning
Planning to make your child CROREPATI
“Education is the key to unlocking the world, a passport to freedom” – Oprah Winfrey.
As parents, it is natural to want the very best for your child – the best schooling, best opportunities in life, grand marriage function etc. But you see, education is one of the best gifts your children can receive.
And as Indians, it is strongly ingrained in us that education is everything, and we want our kids to go to the top schools for their chosen fields.
Even though education is the most important priority for parents, the costs are a major concern. They shell out a large portion of their savings to provide the best education.
Hence, a financial plan to achieve this goal is very important.
If you already have children, the earlier you start planning, the better.
Especially if you want your child to attend good institutions and abroad,you must begin planning soon as the education costs consider highest inflation rise.
Consider this example:
Mr Shah has a 3-year-old son, who will graduate in 15 years. Mr Shah wants his son to pursue engineering. If the cost of graduation in today’s terms is Rs 5 lakh, let’s ascertain how much it will cost to send his son to engineering college after 15 years?
|Son’s Age||3 years|
|Cost of Education in today’s terms||Rs 5 lakh|
|Time left for Graduation||15 years|
|Inflation Rate||10% p.a.|
|Cost at time of Graduation course after 15 years||Rs 20.88 lakh|
|Amount Mr Shah needs to invest per month||Rs 4,180|
You see, as seen in the table above, the cost of education after 15 years will rise to Rs 20.88 lakh due to inflation. And to fulfil this goal, Mr Shah will have to invest Rs 4,180 per month, assuming he earns a return of 12% per annum.
However, if Mr Shah delays this investment, and begins to save for his son’s education five years from now, the investment will be more than double, i.e. Rs 9,079 per month.
Similarly, to ensure your child receives the best education, you need to prepare yourself financially.
If you plan now, chances are you will not compromise on your child’s future, his/her dreams, aspirations, and ambitions.
Providing Children the ideal opportunity for learning and development is foremost among any parent’s goals. Therefore, it’s necessary to carefully plan a children’s education fund. When your child is ready to go to college, you will
be ready with the right amount of money and won’t be awed by the high costs of education.
Steps to take while planning your child’s education fund:
Waste no time
Planning for your child’s education is a long-term financial goal. The best time to start planning for your child’s future needs is when he or she is born. Assuming your child will go to college at the age of 18, you will have nearly two decades to create the right-sized fund for your child’s need. The effect of compounded growth will allow you to achieve this goal with small, monthly contributions.
Avoid low returns investments
Children’s education is typically a long-term goal, and as seen from the above example, there is high cost inflation here as well. Therefore, you should invest through instruments that provide inflation-beating returns. A long investment tenure allows you to take moderate levels of risk, which can potentially produce high long-term returns.
Plan for inflation
With inflation, higher education becomes more expensive each passing year. In 2018, a premier business school raised the fees for its flagship two-year course to Rs 21 lakh. In 2008, the same course cost Rs 6 lakh. Thus the cost has grown at an average rate of about 13%. Assuming a similar inflation rate, the same course may cost Rs 69 lakh in 2028. While calculating your child’s education funding needs, it is important to assess the future costs of education.
Start small and step up
It’s easy to be daunted by the astronomical money requirements. However, while investing towards any goal, you should implement the concept of stepping up. For example, you earn Rs 50,000 today and save Rs 10,000 per month. Next year, if your income increases by 10% to Rs 55,000, you should increase your savings by 10% to Rs 11,000. Stepping up your investments each year allows you to start with baby steps when your income is small, to bigger steps as your income grows.
DAVE FINTECH Strategies for Child Education/Marriage Planning :
Based on information received from parents, we will
- Define your Child’s Goal carefully
- Determine the Child’s Age at which you want to plan for the respective goals
- Determine the Amount required for the goal
- Consider the Inflation rate
- Determine the Asset Allocation required for each goal
- Calculate the investment amount required to achieve the goal
- Start Investing in suitable investment options like Mutual Funds to reap benefits
A sum invested regularly in the plan can help accumulate a corpus that will secure your child’s financial future. The amount of contribution will depend on how much you plan to save. We will assist you in chalking out an ideal financial plan for your child’s future.