In a recent survey conducted by an international bank, it was revealed that more than 44% of retirees end up with almost no savings and have to depend on their children for financial support. Conversely, kids in the family have varied monetary needs all along their growing up years. What starts with school fees will lead to college fees, post-graduation expenses, and even wedding costs in future. This means that as an earning member of your family, you will have to take the financial responsibility of your parents as well as your children.
Taking up responsibility however does not mean compromising on the other aspects of your finances. Rather than letting money weigh you down, start planning now and initiate investments with an eye on the future.
Here’s how you can plan your investment wisely for your parents and children.
Budget Your Income And Expenditure To Channelize Savings
As a first step to building a healthy investment plan, list your income and expenditure paying special attention to all your expenses, including your EMIs and loan repayments. This will give you an insight into your finances and will work as a reality check. Looking closely, you will learn how much of your spending is actually meaningful. Plan to take on this budgeting task every quarter so that you can review your income and expenditure in time to prepare yourself financially for the rest of the year. Also, every calculation will help you add or delete expenses as required. In the process of this analysis, you will also know how much unused money you have in your kitty for savings.
Estimate Future Goals And Needs To Create A Customised Investment Portfolio
Dedicating at least 20% of your income as savings will help you build a healthy corpus over time. However, just making your funds languish in a savings account will not help. Ensure that your saved money grows over time so that you can utilise the funds to pay for all your kids’ and parent’s goals and requirements. In order to do this, start by identifying the array of needs for each of them and then list them based on a cost estimation. This means that if you are listing down medical expenses for your parents’ then keep their existing ailments in mind and then jot down the cost of surgeries, hospital stay, and more. This will help you invest with a goal in mind.
Say you want to save for your child’s wedding. Count the years you have until the wedding and decide how much you want to spend. In view of this estimation start dedicated investments for your kids right now. For instance, you can simply choose to invest in an FD or start an SIP to save smart.
Count In Inflation To Save Adequately For The Future
While calculating future expense, pay special attention to inflation. For example, if you are calculating your child’s post-graduation expenses, first consider the number of years until your child start this course of study. Then calculate the future cost by adding average 8% inflation for each year. Say the present cost of post-graduation based on the course your child wants to undertake is Rs.30 lakh, and he/she is likely to begin in the course in 5 years. In view of 8% annual inflation, you will have to save about Rs.32 lakh so that you have the entire sum you need in time. Not taking inflation into account will throw off your calculation and yield insufficient funds.
Using these three tips, you can invest wisely and create a balance between your present and future financial needs.
The writer is CEO, BankBazaar.
BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.