When investing for your children, structure your investments well to meet all kind of goals be it education or marriage. Read on to know why it is important.
Investing for your children – be it their education or marriage – is much like investing for retirement. The cost of delay could be steep, and it is wise to begin early. The goal itself may present itself in many forms across several years, and you need to structure your investments well to meet these goals as and when they come around.
As mentioned, it literally pays to have a long-term horizon in mind. Equity Funds help tide over short-term market fluctuations and give a very good chance of beating inflation over the long term. An SIP in a diversified equity fund will be best suited to meet the financial goals for your children.
For investors with a lower risk appetite, a balanced fund could also be a suitable choice for this purpose, keeping in mind the improved stability due to the underlying debt instruments for their portfolio.
Keep in mind that the overall gold of your child’s education is, in fact, a collection of various goals at different times during their life: the cost of school education is significantly lower and comes earlier than the cost of a degree, which requires more funds and comes around many years later.
Hence, you should intelligently identify these goals and their timelines, and move your investments into safer instruments a few months or years before you are ready to spend for the purpose.
Accounting for Inflation
Most importantly, be judicious while estimating inflation in the cost of education in particular. Such a figure may be above the inflation rate for more generic items, and the only way you can keep ahead is to start early, invest enough and be aggressive in your outlook.
After all, education fees may not rise steadily each year, which may make the task more predictable. They jump every few years, making up for being static for past time periods.
As always, start planning and look to invest proactively. The money involved is a fairly hefty sum, but can well be a successful stepping stone in your overall financial plan.