As a parent, you want to provide the best for your children. However, with rising costs, itis becoming increasingly difficult for parents tokeep up with the financial requirements of raising and educating children. More and more parentsare realising the need for financial planning to provide the best possible educationto their children
To plan for your child's education , you must first determine how much you will need in the future and then save and invest towards the goal, by choosingthe right asset mix.
Let us consider an example:
Rajis 30 and works as a software engineer.He got married 2 years back and has been blessed with a baby girl. Raj puts a side Rs15,000 from his monthly savings towards his daughter's higher education.
Say, his daughter would like to pursue Engineering and an MBA there after.
An engineering degree from a reputed institute costs Rs7 lakh today. Given the average rate of inflation at 8%, the same degree, in the same institute may cost approximately Rs 22 lakh 15 years hence.
Further, an MBA from a reputed institute in India costs anywhere between Rs15-Rs25 lakh. The same degree, if she chooses to go abroad, costs Rs50 lakh. Taking they early in lation rate at 8%, the same degreea fter 21years will cost Rs1.25 crore in India and Rs 2.5 crore abroad.
If Raj invests Rs15,000 in an equity diversified mutual fundth at gives a yearly return of 14%, then at the end of 15 years, Raj would have accumulated Rs83lakh to provide for his daughter's engineering and MBA education.
The same would not have been possible if Raj would have opted for traditional investment options that provide are turn of 8%-9%. Hence, planning early with mutual funds can ensure a bright future for your child.
Since most key goals like a child's education are long-term, equity as an asset class provides the best option to generate higher potential returns. Mutual funds are one of the easiest and hassle-free ways to invest in equities in a systematic manner, overalong-termat periodic intervals (throughSIPs). Not only a remutual funds professionally managed, but they are also tax efficient and work with smaller amounts to start with.They are ideal for saving for key miles tones of your life like retirement planning, buyinga home or planning for your child's education.