New Delhi: Children are God's greatest gift as they hold that magical power in their smile! All parents strive hard to give their child as best as they can – be it clothing, food, primary education, college or marriage. However, parents need to remember that it could cost lakhs of rupees to raise their child -- and that's not even including the cost of college.
This could be quite intimidating, but with careful planning these expenses can be more manageable. Estimates suggest that raising a child in urban India from cradle till college costs in excess of Rs 60 lakh. This include professional course which costs Rs 15 lakh at today's prices (the amount needs to be adjusted according to inflation). Certainly, education amounts to a big chunk of the total expense on a child.
Survey indicates that an overwhelming majority of Indians choose to invest in Public Provident Fund (PPF) and fixed deposits for their children. A lot of them also opt for traditional insurance policies. At the same time, parents also invest in equity mutual funds and stocks for their children, and some in child insurance plans that provide for the education of the child if the parent is no more.
Here are some of the tips that you need to remember as you aim big for your kids:
Start early
Begin the process of saving and investing early. This will give you sufficient funds to fulfill your children's desires and ambitions
Invest long-term
Are you saving for your daughter's marriage or for your son's education? Financial planners say it is good to segregate the investment for each goal.
Investigate mutual funds, savings, money market accounts and other safe places where money can grow.
Select the right investment options
Hence you must select the right investment options so that your portfolio progresses towards each of the financial goal set for your children's better future. Your portfolio should reflect your risk tolerance level (Income, Expenses, Financial responsibilities etc.) and risk appetite (Age, Past experience etc.)
Choose the right portfolio mix
It is important to choose ideal portfolio mix (Equity, Debt, Gold) to grow your investments. Many investors are hesitant to put their savings in the stock market due to volatility, however, in the long term equities as an asset class will largely help you to create the corpus required to meet the financial goals.
It is important to de-risk your portfolio when there are only a few years left for the goal. So, if the goal is less than 3 years away, you must completely avoid equity or gold, and shift 100 percent of your risky portfolio to debt/fixed income.
Let grandparents help too
Grandparents often have the means to contribute to the child's financial future by investing in funding options to help pay for college. Small investments begun from day one can grow enormously over 18 years.
Keep investment and insurance separate
It is prudent to keep your investments and insurance separate.
