People generally start planning for their child when they start their education, and then for graduation and post-graduation. But most fail to account for an increase in regular expenses after the baby arrives. After a baby is born, additional expenses such as the hiring cost of a nanny, healthcare, and schooling, are normally overlooked. Though you might be saving a lot today, will it be enough for the long run? Industry experts say while planning for the long run most people do not factor in inflation or invest in growth asset, which is necessary. It is not just about starting early but also choosing the right investments for your goals.
If you are also planning for your child, know how well prepared you are, and the shortcomings you need to fill:
- To start with, experts suggest, one should establish in present terms the cost of education for their child. While calculating their future expenses, then consider the inflation rate at 10 per cent. One can also get this done with the help of online calculators available.
- While planning for education cost, other expenses such as the cost of books, coaching, and transportation, along with the course fees need to be considered, to come up with the final cost. At times in certain educational courses, additional coaching turns out to be costlier than the course itself.
- You need to specifically plan if you are planning to send your child abroad. As the cost depends on the type of course depending on the stream some are expensive than the other.
- Based on what your goals are and what are you saving for, choose your investments avenues. Experts suggest opting for growth assets for long-term goals such as retirement growth assets, children education, child marriage.
- Investing in growth assets such as shares, property, and alternative investments carry higher levels of risk. They, however, over a longer period of time also have the potential to deliver higher returns.
- Investments should be made depending on the child’s age. For instance, if the goal is more than 10 years away one can opt for an aggressive investment strategy, and give your investments exposure to the market. For this type of goals with long term, equity mutual funds are great investment vehicles. One can opt for hybrid funds or large-cap funds which provide a good return on investment in the long run.
- If you need to meet your goals within 3 years, short term options such as bank FD, short term debt funds should be looked at.
- One can also look at specific child plans. These plans come with dual benefits – both insurance and investment. One can also opt for plans available under the ULIP category. They come with a 5-year lock-in period and tax benefit under Section 80C.