Here’s a plan to take money out of the picture perfect portrait of your children’s future
It could be an advertisement on the television or newspaper. You see a youngster in graduation robes and your mind goes on an overdrive. You imagine a family portrait 20 years from now with your grown up child holding the scroll containing the degree. But then there is a killjoy.
Your start thinking about the large amount of money needed for your child’s future. You might even imagine a silhouette of money worries in the picture perfect family portrait of the future. Okay, the last bit was an exaggeration but you get the drift, don’t you? The good news is all that it needs is a simple plan to get money out of the equation when it comes to your child’s future. Here is the plan’s outline:
Grasp the multitude of possibilities
You wanted to become a railway engine driver when you were a small kid but became an engineer. Your child’s career graph can be equally dramatic. Of course, you will perhaps have no inkling of your child’s eventual career now. Yet it is smart to collect information about the emerging possibilities, especially new careers such as industrial design, healthcare management, corporate law and product design. This will eventually give you an idea of expected future costs.
Find out what they cost now
The costs of various higher education options vary across disciplines and institutions. Get an idea of the range of costs. For instance, tuition fee for undergraduate medical studies in private medical colleges can be as much as say Rs 55 lakh.
Estimate costs in the future
Your parents may regale you with talk about low costs during their college days at the dinner table and you might be amused. However, you need stay focused to be adequately prepared for what lies ahead for your child. You can do that when you make intelligent estimates of costs. Cost of higher studies,especially the technical education in a metro city like Delhi,has almost doubled in seven years in the period up to 2014*.If the costs go up at the same rate, in next 15 years, expect the costs to increase by four timesi.e. a course costing Rs 25 lakh to rise to Rs 1 crore.
You child saves regularly in her piggy bank. Believe it or not, you need to do the same for her future. And sooner you start, the better, since you get to save more and get more time for your money to grow more.
Plan for high growth investments
Just setting aside money will not help your childlive the dream, you dream of. Over long periods, and with such large requirements, your money needs to work out and grow muscles.
Equity investments are one of the best gyms to make your money grow muscles.Of course, past performance may not get replicated but they provide a glimpse of growth possibilities. In last 15 years ending May2016, equities as represented by the Sensex have given an annual return of 14.22 per cent, while in last 10 years the return was 9.88%**.
Plan for regular investments
Like regular exercise, your money can grow muscle through regular investments. The best way to do this is through investments in equitieswith systematic investment plans (SIPs) of equity mutual funds. They help you make small, but regular investments,in high growth equities. You not only benefit from its low costs but also the expertise of fund managers who manage the money. The results can be awesome.
If you invest Rs 20,000 every month for 15 years and the money grows at 12 per cent every year, you will end up with Rs 94.29 lakh***.That’s right! That is all it needs to have a picture perfect future family portrait.
Clearly, life’s big dreams need small steps and a simple plan. SIPs help on both counts and help you take money out of the picture. So, go ahead, get started in making a great family portrait of your child’s future.
Disclaimer: Past Performance may or may not be sustained in future. Thecalculation, based on assumed rate of returns, is meant for illustrative purposes only. SIPs does not guarantee or assure any protection against loses in declining market condition. In view of individual nature of tax consequences, each investor is advised to consulthis/ her own professional tax advisor.Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
**Bombay Stock Exchange
*** As per SIP formulae used on the website of Birla Sun life Mutual Fund
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