Financial planning for your child’s future can seem like rocket science. It is, in fact, easy, if you have certain basic thoughts in place
BY RUTH DSOUZA PRABHU
Once we were over the initial euphoria of having our daughter—which took a sizable while—we realised that we had a long journey in front of us. Here was a little soul completely dependent on us to find a footing in the world and live life to the fullest. It was up to us now, her parents, to ensure that we equipped her well to face the world.
Financial planning, is, of course, the cornerstone to a secure future – as the sole beneficiary to our own life insurance policies and with adequate medical insurance cover, we were sorted on that front. But one of the largest expenses that we were going to undertake as parents is that of a quality education. Besides basic education, we also had to factor in higher studies abroad.
Now, planning for something that big is no small task. So we did the first thing we could think of—ask the elders what they did. What came from that line of inquiry was a conservative form of investment, where liquid money in hand was placed in a secure medium like a fixed deposit (FD) for a long period of time and on maturity was used as seen fit. But, what we realised at the end of this assimilation of information, times had changed and inflation was not slowing down at all.
This is when I spoke to Priya Sunder, director, PeakAlpha Investment Services, Bengaluru, and she explained, quite succinctly, the way to go about planning things for your child’s education. Let me break it down for you.
UNDERSTAND THIS WHEN STARTING OUT: Children’s education is one of the primary goals that money is set aside for, after one pays off existing debts and is ready to invest. The money accumulates in small amounts every month and year and then you see the returns.
The longer tenure you have for any investments, the better it is for your child in terms of returns. So if your child is one or two years old, you have 16 to 17 years ahead of you to put aside money. Not everybody has upfront money to invest, on hand today, to set aside and wait for it to grow, and so a monthly installment is generally the safest option.