Planning Funds for Children's Education & Marriage
In the dynamic tapestry of life, certain milestones hold paramount significance. Two such events, universally recognized, are a child's education and marriage. Both necessitate meticulous financial planning, ensuring you are well-equipped to provide for your child without straining your resources when the time comes.
Understanding the Gravity of the Task: Today's cost of education or marriage is not what you'll pay when your child reaches that stage. Several variables, including inflation, change the financial landscape over time. Thus, forecasting these costs and planning for them is imperative.
Calculating the Projected Costs
Factor in Inflation : Inflation refers to the annual rate at which prices for goods and services increase. Today's college tuition or marriage expenses will undoubtedly be higher in 20 years due to inflation.
If today's college fee is Rs 10,000 and inflation is at 6%, the cost after 20 years would be:
- Future Cost = Present Cost × (1 + Inflation Rate) ^ Number of Years
- Future Cost = Rs 10,000 × (1 + 0.06) ^ 20
- Future Cost = Rs 32,071
Estimate Other Expenses : Tuition isn't the only cost; factor in accommodation, study materials, potential overseas stays, or other marriage-related expenditures.
Setting Aside a Dedicated Fund : Dedication is the cornerstone of effective financial planning. Designate a specific fund solely for these goals. This ensures you don't tap into it for other needs, keeping your child's future secure.
Investing Wisely
Systematic Investment Plan (SIP) :SIP allows you to invest a predetermined amount regularly in mutual funds. It instills financial discipline and leverages the power of compound interest. For instance, if you start an SIP of $100 monthly with an expected annual return of 10%, in 20 years, your investment would grow to approximately $75,937.
SIP Top-up : SIP Top-up is a feature allowing you to increase the SIP amount periodically. This is incredibly beneficial if your income grows over time. A 10% annual top-up on the above SIP increases the corpus to approximately $132,680 in 20 years.
Diversify Investments : Avoid putting all your money in one avenue. Diversify across equity, debt, and other instruments. This balances out risks and ensures a steady growth trajectory.
Stay Informed : Periodically review and adjust your portfolio. Rebalance it to align with your goal's time horizon and risk appetite.