While all of us have the usual bank savings account, PPF savings, and the usually fixed deposits, they are often not enough to meet the higher education costs today, especially if your children want to go into specialized, highly technical, lab-oriented courses in the future. Along with their educational expenses, you also need to take care of occasional medical emergencies and plan for your retirement. When it comes to savings, the predictable returns that you get from your fixed deposits will soon cease to suffice due to the alarmingly increasing rate of inflation and the high taxes that the government is imposing. You need to start saving early, and wisely. Here is why.
The Right Time To Start Investing
Investment takes time to develop. The cost of education is usually a long-term target that takes more than 5 years to achieve. Take into account the duration of time you need to prepare your children’s education fund. The longer time you have the lighter your load. The duration and amount of costs that should be set aside each month are affected by how old your child is today. Hence why it is ideal for a child’s education planning to begin once you and your partner plan to have a baby. The sooner you start putting money and investing, the better.
Opportunities available to secure your child’s future:
- Equity Mutual Funds:
Mutual funds are all about investing in stock and bonds, especially investing in equities and bonds. By doing this for a period of 8 to 10 years, you can aim to acquire annual returns of about 12% or more. Yes, mutual funds are subject to market risks and many investors are wary of them because they do not want to gamble with their children’s future. However, the chances of an investor losing money in Mutual funds are very slim. Even if there are fluctuations in the market, the risks get leveled out when you choose to invest for a long period.
The Public Provident Fund is a safe way to deposit money for the long term. You can start investing with as low as INR 500. You are can deposit any amount within INR 500 to INR 1,50,000 within the span of a year. Since PPF accounts are calculated with compound interest, you can accumulate a considerable amount over a period of 15 years and the entire amount is tax-free.
- Fixed Deposits or Recurring Deposits
Fixed Deposits are a safe and secure way to store money in your bank. You can save your money through recurring deposits or create fixed deposit certificates through the bank for a fixed number of years, at a fixed interest. You are assured of getting the cumulative amount at the end of the said period. Although fixed deposit interest is not very high, those who want to invest in a risk-free manner and want guaranteed returns, still find them a viable method of investment.
Gold is a traditional avenue of investment. You can buy gold bars and keep them in your vault, or you could buy gold bonds of equal value. Gold price appreciation has been steady over the last few decades and that makes it sure to give you guaranteed returns if you are willing to invest long-term.
- Investing in Mutual Fund through SIP
Not only do Mutual Funds give you the option of investing in regular and easy investments, but you also have a wide range of asset classes to choose from. You can invest through Systematic Investment Plan (SIPs) for both your short-term and long-term needs. For example you can get assumed 13% annualized returns by investing about INR 1000 per month, potentially gaining about 2.5 lakhs in a span of ten years. You can use an L&T Child Education Calculator to determine how much you would have to pay each month. You may also choose to invest in debt and liquid funds over time, or even a mix of them. As your children grow, you will start having an idea about their likes and interests and which fields are they most likely to opt for.
With the right savings, you are sure to pave a bright future for your children, free of worries and with your investment safe. You can also click on L&T Mutual Fund and learn all the funds they are offering including the Fund Size, NAV, and the risk associated with the fund. Always have the habit of reading the scheme related documents before investing to understand the scheme type, investment patterns and the risk factors associated with particular investments and consult your financial advisor to understand the implication of any investment
Disclaimer: This information is for general information only and does not have regard to the particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax, and financial advisors before investing. The recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.