Biology is the least of what makes someone a mother—Oprah Winfrey, a talk show host and a philanthropist.
Being a parent is an on-the-job training. No amount of reading or taking tips from others can prepare you for parenthood. However, there are certain steps you can take to secure your child’s future.
Importance of planning a kid’s future
“If there must be trouble, let it be in my day so that my child may have peace,” are utterances of the famous American political activist Thomas Paine. In spite of the utopic desire, the future remains beyond our control — no matter what we do. But, long-term financial planning for your child can help you control the uncontrollable.
Set short-term and long-term goals
Child’s education is a top priority for all parents. But education costs have spiraled out of control. For instance, an engineering degree is estimated to knock you back by Rs 24 lakh by 2027. Not just higher education, getting your child admitted to a primary school would cost you an arm and a leg.
You might want to save some money for emergencies as well. You never know what the future beholds.
Also, your child may excel at sports or have a flair for the arts. You might want to back your child to the hilt. Extra training, competitions and travel would make a further dent on your earnings.
Keeping in mind all such scenarios, it becomes important to set long-term goals. After all, who would not want to give their child the best they can?
Keeping aside money for your child becomes paramount. But merely saving your money in a savings account is not ideal. Your money would accumulate, but not grow. Investing, on the other hand, can see your money increase on a year-to-year basis.
Mutual funds for future financial needs
So, where can you invest? One plausible answer would be in mutual funds. There are other investing options too – stocks, fixed deposits (FDs), treasury bills, among others. But, they are either too risky or too conservative. Mutual funds, however, sit somewhere in between on the scale of risk.
Mutual funds put your money in different sectors of the economy. Spreading your money reduces the risk of losing your money. The reason being that different sectors react differently to market swings.
Your investments need to be determined by your child’s age. The younger the child, the more time you have to invest.
So, if your child is an infant, investing in equity funds would be a good option. Equity funds have historically countered market volatility in the long run. A CRISIL AMFI Equity Fund Performance Index report pegs equity funds’ 10-year returns at 11.56%, as on June 30, 2017.
But, if your child is a teenager, you might want to invest in short-term debt funds. The five-year returns stand at is 9.19%, as on March 30, 2017.
On the other hand, money in fixed deposits has grown by 8.7% in the last 35 years, while savings account money has increased by a meagre 3.8% over the same period.
Bottom line
The best that you can do is to prepare well in advance and ensure that you have invested for your child’s needs. This is why investing in long term mutual fund plans can benefit you in planning for the future.
To ensure you tick everything on the checklist, you could invest in Mutual Funds.
