Kids are our life line. They pour unending and selfless love on parents. There is one say once a parent always a parent. That so true. Being a parent is the most important responsibility of the world. We constantly think of the welfare of our kids. Apart from providing security, good teaching (sanskar) and values and fulfillment of their basic needs parents have to provide monetary help to their kids till they become Independent earner.
Parents need to plan for 2 important activities related to kids and those activities are their life goals
- Kids education and
- Kids marriage Planning
Let’s discuss both goals in details.
Kids education : You all must have seen the WhatsApp forward where before child birth admission in IIT coaching is being planned. Jokes apart. But this is the reality in India. Parents are under huge pressure to accumulate corpus for their kids education purpose. As India experiences the highest inflation rate in educationevery year.So while calculating corpus needed for kids education, inflation should be considered at 8 to 11% every year and according arrive at the Corpus.
This goal is not only long term but is a recurring goal too. They need money in every year for fees and tution classes as well as extra-curricular activities. So planning of Kids education should be done like wise. This goal can be divided following ways
Recurring expenses of school fees, extra-curricular activities and tution classes: These expenses parents have to incur every year. Mostly now school as well as tution classes take half-yearly or yearly fees. For mitigating this one time expenses parent can open a Recurring Deposit (RD) in the bank and keep on contributing per month to that there won’t be any burden of one time payment.
Graduation Expenses: This a comparatively long term goal if you have toddler, medium term goal if your kid is in 4th or 6ththen its a medium term goal and kid is in 8th or 9th then it is short term goal.
For long term : Parents can take equity exposure as per their risk taking capacity . Ideally you can take 70:30 proportion where Equity is 70% and 30% debt.
Start SIP in good quality Multicap mutual fund.
SIP in long term Debt fund
For medium term : Parents can take 40:60 proportion where Equity is 40% and 60% debt.
Start SIP in good quality equity oriented Hybrid mutual fund
Open a Fixed deposit
SIP in short term Debt Mutual Funds
For Short term: As time is very less for parents equity is out of question. They need 100% exposure in Debt.
Start an RD for a year then convert that maturity amount in FD. Do it every year till your kid cleared 12th exam.
Start SIP in good quality liquid fund or overnight mutual funds.
Post graduation Expenses: This goal is relatively very long term goal for your baby. You can plan your investment like this
Along with SIP in Multicap mutual fund you can also start SIP in Small and Mid cap mutual fund in proportion of 80:20.
Along with long term debt mutual fund open PPF account on the name of your child you being the guardian.
Open Sukanya Samruddhi Yojana (SSY) for a girl child.
For medium term and short term goals plan on the above mentioned points.
Child Marriage : Parents can take more equity exposure for this goal compared to kids’ education as this goal is comparatively longer. So you can take 80:20 proportion where Equity is 80% and 20% debt.
Start SIP in good quality Multicap Mutual fund and good quality small and midcap mutual fund in ratio of 75:25.
SIP in good quality long term debt fund
Start buying 1 gm of gold every month. You can buy Gold ETFs or Gold bond. These are more liquid and safe than physical gold.
My thoughts:
I know kids are precious gifts by GOD, and parents can go to any extent to make them happy and try hard to give them the best possible education but remember this is not the only goal of your life. Retirement planning should be one of the most important goals of everyone’s life. But unfortunately, in India, we postpone provisioning for the same, for the sake of other goals. Still, Child education and their Marriage planning are on the top of the list of individual’s goals. We sideline retirement planning for many years. Always give priority for retirement over any other goal then kids education and marriage will come.
As you know cost of education is increasing day by day even if you try hard to accumulate loads of money for kids education you may find the shortfall at that time you can take a help of Education loan. Never hesitate to go for education loan and let your kids repay it when he/she starts earning. You should not allocate all your savings only for kids education goal rather consider Education Loan as the cushion.
You may dream so any things for your kids. You may want him/her to be Doctor/IIT Engineer or go to foreign university to study and start accumulating corpus keeping these dreams in front of you but always be ready to face reality. Kids may have different dreams and aspirations please value those and accept them full heartily. So always keep balance in accumulating the Education Corpus.
As far as marriage is concerned I am myself against of big fat weddings. Never ever stretch your budget too much beyond your limit. Wedding is a celebration of two individuals and their close families only keeping society pressure in mind and spending a lot is not worth. Ask your kids to contribute in their own marriage.
Last but not least TEACH your kids the VALUE of MONEY. This is the most important lesson of life. Make them Emotionally and Financially independent and Mentally strong to face the harsh reality of this world. Money can be earned any time but developing kids personality and inculcating core and true values in them is most important. SPEND some time with them. Create memories which they cherish for the lifetime. Your quality time is their most precious GIFT you can offer them than education and marriage corpus.