They say money can’t buy you happiness. But I would be incredibly happy to see my future kids succeed and build a good life for themselves. And that comes with a cost. You need to save for your children’s education and career goals, apart from investing in their weddings.
There was a time when parents would spend a substantial amount of their earnings on their daughter’s wedding rather than her education. Education is key for empowerment. It is sad – be it a son or a daughter – when an individual isn’t able to achieve their full potential because of financial struggles.
This is why, we must think now, to secure our children’s future, say 15 to 20 years down the line. Here’s how you can do it.
1) Set your goals
It’s not as easy as it sounds. Yes, you need to save money for your child’s education, some for health emergencies, some for aiding their career and maybe some for their wedding. However, one needs to take into account time and the increasing cost of say, the course they want to opt for. According to Economic Times, the inflation rate of six per cent a year can make a course costing ₹4 lakh presently cost around ₹ 10 lakh after 16 years. Hence, one must take these hikes into account and set goals accordingly.
2) Start early and plan for at least 15 years
When it comes to saving for your children’s future, it’s best to start as early as possible. “Money makes money. If you invest for a longer period, you will not just be able to invest more money, but also it will multiply into a bigger sum,” says Meghna Jaisingh, a chartered accountant and financial advisor.
3) Consider investing in Children’s Mutual Funds
These are considered to be long-term savings and come with a lock-in period of a few years, to avoid short-term exit and to maintain investment discipline. One can find a balance between equity and debt mutual funds to diversify their portfolio. “Mutual Funds come with their share of risks – the higher it is, the higher the return (if things go well). However, to protect your interests, it is important you don’t keep all your eggs in one basket and diversify your portfolio,” Jaisingh explains.
Funds may not perform as well as one expected them to, due to external factors. “While a top-performing option may give you returns of even 11 per cent, it can also go down to as low as 3 per cent. One can invest in a mix of equity, debt and hybrid funds for better flexibility and less risk,” Jaisingh advises.
4) Consider investing in Sukanya Samriddhi Yojana
It is a deposit scheme launched as a part of the Indian government’s Beti Bachao, Beti Padhao campaign. This fund aims to encourage parents of daughters to make long-term investments for their education and marriage. One can invest for 15 years but the lock-in period is of 21 years. Sukanya Samriddhi Yojana and other government schemes offer complete security. “Unlike Mutual Funds, there is no risk here of losing money. If you end up investing in mutual funds that don’t perform as expected, it can pose a threat to the fulfilment of your financial goals. However, with government schemes, your money is 100 per cent safe,” Jaisingh points out.
“Sukanya Samriddhi Yojana offers an interest rate of 7.6 per cent p.a. for Q2 of FY 2021-22. It is also eligible for tax exemption and you can invest any amount, ranging between ₹ 250 and ₹ 1.5 lakh,” Jaisingh informs.
5) Secure your own future as well
“These days, people are getting married and having children much later than before. It means, even if you have a child by the age of 34, by the time they become an adult, you will be in your 60s. Plan for the future, so you have money to sustain yourself as well as for helping your child until they are financially independent. A retirement fund can do that for you,” Jaisingh explains. She also suggested investing in land or properties for better returns, if it is feasible.
Also Read: Systematic Investment Plan (SIP) Guide For Beginners
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