All that you need to know as to where and how much to invest for your children needs. You do all that it takes to be a good parents. You take your family and kids to dinner, you spend time with family on weekends , you buy gifts for kids and even the latest gadgets to keep them happy. After all, one earns for the family , isn’t ? But then, are you merely looking to make their presents perfect or are you concerned about their future too ? Schooling and then higher studies will play an important role in the way children shape their future life. Time flies and soon kids will be in college and then higher studies, . Are you prepared to meet the cost of education few years down the lane?
EDUCATION COSTS ARE RISING AND RISING
FASTER: The cost of education is rising . Unlike general inflation, which seems to be coming down cost of
educations according to some
estimates it rising at about 10-12 percent an annum. Even by conservative
estimate if education cost
inflation then an engineering course that costs Rs. 6 lakh presently will cost around Rs. 15 lakh after 16 years.
Similarly , MBA course that costs around
Rs. 10 lakh would cost around Rs. 34
lakh after 21 years . . Children’s marriage costing Rs . 15 lakh at today’s cost would make you shell out nearly Rs. 35 lakh
after 15 years. Unless you
prepare to meet the cost of higher education
, making it at the last stage
could be difficult to handle. Also the
kind of the course and educations streams few years, from now could be very
different from that what we have now. The
new ones would in all like hood be more expensive and your children might be hooked on to
them., Prepare now to make them realize
their dreams.
FIND OUT HOW MUCH
YOU NEED: If undecided on the
course and if your kids are still small,
consider 2-3, different courses and estimate their outflow, at today’s cost. Then, inflate it at a conservative inflation
rate of about 6 percent per annum
for number of years after which kids
would need them. The resultant figure is
the future value of the your current
need and this is what you need to
save. Doing this calculations helps
in savings the right amount more
no less. FIND OUT HOW MUCH YOU NEED TO
INVEST MONTHLY; Once you have
arrived at the final cost, and find out how much you need to save every months
towards. It. Assuming a growth rate 12 per
cent, you need to put aside
around 2,600 per months for the
engineering course after 16 years, while
it will be about Rs. 3.1000 per month for MBA after 21 years . See SIP: for
your child future., SEPARATE CUPBOARDS:
Create a separate investing
process for your children needs. If there are more than one kid, earmark
separate funds for each of them. In a way you are creating separate portfolio for each child’s specific
need such as education and marriage . Tracking them because
easier thus helping you reach
your goals more efficiently. CHOOSE THE RIGHT ASSET CLASS: Choice of the right asset class is very important especially when the
goal is a long term. A small difference in return can result in a big difference in the final corpus . 2 percent
difference in returns generated
over 25-years may show a 40
percent difference in maturity amount
(See Route to golden years,
February 2015. Several studies in the a past have shown that
equity has delivered high inflations adjusted
return compared to other assets
over the long term.
WHERE TO INVEST FOR
CHILD NEEDS: When it comes to investing fro child needs, there can
be several different investments avenues. It is important that investments
are spread across and not confined
to a specific asset or product. Other more common and ideal
investment avenues could be through equity oriented mutual funds and insurance plans. Vhil needs are a long terms goal hence making
use of the potential of equities best the Serves the purpose . Be invested
in equity oriented schemes
either from mutual funds or
insurance plans. In Mf’s choose equity
oriented open ended mutual funds schemes. However what is important
this the right choice of mutual fund schemes
and the right kind of insurance plans.
Unless this is in place, the purpose of savings for child needs could derail.
THE MUTUAL FUNDS PORTFOLIO FOR KIDS
NEEDS: Build a separate portfolio for child’s
specific needs and earmark
savings towards it. Choose 3-5 equity
oriented open ended mutual funds
schemes and start SIP in them. Go for
consistently performing funds that the ha ve delivered high returns over different time periods. Within this, 1-2, can be a mid-cap scheme and
others can be large cap schemes. One can
also invest through ELSS funds and keep
rolling over the maturity proceeds . This helps in savings taxes and also keeps
the goals linked to your
investments . Keep reviewing non-less schemes every two years and take necessary action.
STEP BY STEP TO KID’S GOAL THROUGH SIP:
You need to systematically save
towards your goal which is commonly termed as SIP in investment parlance. All MF schemes have SIP facility. Enroll for
them and give the mandate to your banker
for diverting funds from your bank
account to MF scheme each months. SIP is
an efficient way to reach your goals
with minimum fuss and maximum ease of transaction . SIP makes you avoid the
temptation t o time the market and gives
you the confidence that your goals are well on track. Importantly most of the times using the SIP approach makes you
accumulate MF units at lesser cost than making a lump sum
investments especially when horizon
is longer. =======NURTURING AND UPBRINGING KIDS IN THE DIGITAL WORLD========= Beta , come.... Din