Children are always asked what they want to be when they grow up. As a parent, you want to make sure nothing stands in their way, especially something like the ability to finance their education.
Securing Your Child'S Future
Providing for child's future is a goal that is dear to our heart. We like to do nothing but the best we can. We like them to have a future that is brighter, bigger and better than our present.
Making an Estimate
If it costs Rs.10 lakh to provide good quality education to your child today, to make an estimate of what it might cost in the future, we have to do the math using two more numbers:
Value of Rs. 10 lakh today will become 10 *(1.05)^20= Rs.26.53 lakhs.
Working for It
We do what it takes to get there. Most of the time, we assume that we should save a lot.
Are you Doing enough?
If our investment earns a steady
interest income, this means it earns
a simple rent from the entity using
our money. That rent, actually, will
just about match inflation.
If you invested Rs.5000 every
month (Rs.60,000 every year)
for 20 years @5% rate of
interest per year, you would
have accumulated only
Rs.20.55 Lakh. That would be a
shortfall of ~6 lakhs !
So when you fund your child's education with simple interest-bearing products,
you may just match inflation, and not do enough.
Your Alternative Choice
If your goal is far away, the money you save should grow bigger and beat inflation. That is why you need equity investments. Equity investing is a choice that enables growth and capital appreciation. The user of your funds won't simply pay you a fixed interest. The growth in their business, is reflected in your return, through the appreciation in the value of the equity share. That can make all the difference.
Isn't it Risky?
Equity investing is ideal
for long term goals,
since it is capable of
beating inflation
But not all businesses do well. Some succeed spectacularly. Some fail miserably.
That is why trading in shares, or buying this and that can be very risky.
You cannot bet on equity shares on your own and hope to make money from that.
Diversification Is the answer
Your savings are likely to appreciate in value over time, if you instead invested preferably through Mutual Funds.
A diversified portfolio holds shares of big and small, old and new, Indian and foreign i.e. diverse companies. This means you are likely to see ups and downs in the economic cycles, but as long as there are successful businesses out there, equity investing will remain worthwhile.
Choose Equity-Oriented Funds
To beat inflation and meet your cherished long-term goals, choose equity-oriented mutual funds.
They are professionally managed for a fee
They are reviewed and monitored by fund managers
They are well regulated by the regulator
They publish their performance and are widely analysed
Why children's funds From mutual funds
1. Children's Funds from Mutual Funds are products specifically designed for your dreams for your child. It adds the benefit of equity to an interest-earning portfolio of debt products, to help you fight inflation.
2. Children's Funds have a lock-in of at least 5 years or till the child attains age of majority whichever is earlier.
How to use it?
Begin a systematic investment plan at an early date when your child is young.
Increase the SIP amount every year by at least 10%.
Top it up whenever you can. Invest the gifts and prize money into the fund.
Once your child is 18, draw from the fund to meet educational expenses.