The Need of right Investment for your child’s future
In the coming years, the advancements are going to take a major leap. Be it studies, jobs, the way technology is advancing, our children will experience a wholesome new world very soon. Not just the experiences, the costs involved in giving the right exposure to our kids are also taking a major shift.
Being parents is the most wonderful gift for us, but it comes along with Increased expenses. As parents, we all do the best for our kids, starting right from clothing to the various worldly experiences.
I remember the cost of advanced vaccinations, always made me wonder that I need to create the right corpus for my kid. Being a working mom then, I had to look out for the right daycare with modern day facilities and the right care for my baby. Slowly, the search started for a preschool, that gave the right experiential learning that my toddler wanted. And now, after a lot of research, to get into the best formal schooling, the expenses are rising.
Related: Tips for Money Management in Kids
I feel, Not just the education, various celebrations, lifestyle changes, travels, games, clothing, all have taken a surge, from what we experienced in our generation. When I look down the next 18years for my son, all of these expenses will only increase, maybe at the rate of 10% or even more when the higher education starts.
So, what have we done to secure our Child’s Future?
A close watch at the soaring expenses requires a strategy to invest the money for our kid’s longterm goals. To meet each of these goals flawlessly, we need to create a separate fund right from the time when family planning starts.
What do you need to plan wrt investment options for a child’s future?
1. Choose the Right Child Plan Schemes:
Looking for the right investment avenue is very important. While you may find the compounding magical, simply investing in FD, is subjected to low returns, with interest incomes being taxable.
- Various Child plan schemes, PPF, and a balanced Equity Mutual fund (for long term) are some of the best options you can consider for your child’s future.
- Sukanya Samriddhi Account is a great option if you have a girl child due to better returns (though Interest rates may vary) and tax-free interest income.
- Also, to have a secure future for the family, the plain vanilla Term Life Insurance plan is a must.
2. Start Investment Early:
That’s the key. We started a separate child fund, right after our baby was born. Many might think that there is no need for that, but I would say, start calculating the child expenses for the next 10-15 years and you’ll understand the necessity. Simply factoring in the inflation for education, maybe at around 6-7%, for the next 15 years (basis your kid’s age) will open up your eyes. Don’t panic when you see that a higher education degree might cost you more than 20lacs down the line. This is why we need to start investing at the right time, in the right fund/scheme.
3. Short term and Long term goals for Investment:
Instead of going for personal and education loans (which ends up burdening our lives), fix a certain amount that you can start investing. Have the right mix, partly for short-term goals for your child and majorly for the long term goals. The major expenses come in the form of Education and Marriage. Hence, our long term plans should be able to beat inflation in these categories. So, for Short term goals (with fewer expenses), one can have more investment in Short Term Debt funds, while for Long term goals, have a right exposure in Equity funds, Gold and other avenues.
For us, as parents, I’m sure, nothing is bigger than seeing kids achieve their goals. Hence, it is imperative that we look at creating Child’s Fund seriously. Instead of picking any product, understand the real benefits it provides and also ensures that it matches your child’s long term plans.