Skip to main content

Steps to secure your child’s future

Cause For Concern: Cost Of Education Slated To Grow At Faster Rate Than Inflation

 

EVERY parent today wants to be able to provide enough for his/her child so that they can follow their dreams. As per an Education Insights survey, conducted by Aviva and IMRB, investment in education is the topmost priority for Indian parents.


   Besides education, marriage and entrepreneurial goals are two other needs which require maximum attention and planning from modern-day parents. The survey reveals that education ranks as the foremost concern for 81 percent of parents' savings for child's future. Around 47 percent parents remain concerned about the cost of higher education which is slated to grow at a far higher rate owing to rise in inflation, and feel that it requires planning at their end.


   In today's scenario, no parent can guarantee that they would be around forever to take care of their child's financial needs. As a parent, you can't rather guarantee that the child's financial needs are taken care of, whether you are there or not! Life insurance helps provide that guarantee. Not only do life insurance products provide financial protection from your family in case something unfortunate happens to you, they also have a savings element for your long-term needs. As per the survey, one in every two parents believe insurance is the most effective tool to cushion the child's education cost, out of which 13 percent are saving through child insurance plans.


   The rising cost of education—which is slated to grow at a rate far higher than inflation, along with the resulting decrease in the value of money—has become a deep cause of worry for most parents today. Let us illustrate this using an example: The cost of pursuing a degree in medicine abroad, which is around Rs 93.6 lakh at present, is expected to soar to over Rs 2.48 crore in twenty years. Similarly, twenty years from now, one may need to shell out Rs 1.27 crore for an overseas MBA degree that costs Rs 48 lakh today. One needs to assess what his exact requirement would be, post a certain time-frame. This is because what is worth Rs 500,000 today, will be worth Rs 15,00,000 twenty years later. In fact, the survey tells us that 81 percent parents admit that they don't know how much higher education will cost in the future and on an average parents are saving Rs 26,000 p.a, which amounts to merely Rs 4,67,242 lakh over 18 years, showing how parents are grossly under saving for future education.


   So how do parents combat financial volatility given the current economic scenario? Well, the answer to this is fairly simple. All you have to do is, be smart while planning your investments. The key to successful planning of a child's future is in starting early and assessing needs (keeping in mind the hidden costs) carefully. Parents need to adopt a disciplined and a systematic approach towards savings with a longterm perspective in mind.


   There is a plethora of investment and savings instruments available in the markets today. This, however, has its own pros and cons—while it gives you a bigger basket to choose from, it also leads to confusion. Here, prudence is to assess your needs and choose a product which suits your needs. It is advisable to take help from a financial adviser instead of going by word of mouth.


   Unit-linked child life insurance plans have been popular world over and have been increasingly gaining popularity in India as well. Child plans not only fulfill the investment objective, but also provide protection in case something unfortunate happens to the parent. This is the only product that ensures that the corpus that you have planned to save for their child's future is available when your child is 18 or 21 years old unlike other savings instruments. The choice of product, however, depends on the risk appetite of parents. i.e. good balance of risk and safety is of vital importance when it comes to planning for a child's future.


   There are various plans available in the market, with options like premium waiver, so that the policy continues even in case of the parent's death, disability or critical illness (if the rider has been opted for), while the life cover is paid out. Income benefit plans also provide regular income (if the rider has been opted for) to meet the child's everyday expenses in case of the parent's death. On maturity you get the fund value.


   While you may well have secured your own future through a financial plan, it is equally vital for parents to plan judiciously and proactively for their child's future, so that the resources are accessible for the child's most important career aspirations as they may surface at a time when it may be difficult to start saving afresh.


   Once again, while the key to successful planning for your child's future is to start early, at the same time, it is never too late to get started.

 

 

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now