In our country, parents go great lengths to provide better future to their children. Not just their daily needs but parents try and make all the wishes of their children come true and strive to make the future better for their little ones. If you’re a young parent, it is imperative for you to start thinking about your child’s future today. The sooner one starts planning for their children’s future, the better it is and more convenient it will be later. Be it higher education or marriage, parents want nothing but the best for their children. In order to make it happen when the time actually comes, you need to plan now.
The reason to start planning early for your child’s future is to have more time for your investments to grow and build a bigger corpus. It is important to factor inflation in your plan. Inflation lowers the value of money over time, so if you’re planning to save money to get your child into a foreign business-school, you have to estimate what is it likely to cost then and make your plan accordingly.
One should list the goal that needs to be achieved and then make a suitable investment plan to attain those goals. It is always beneficial to take the advice of a professional financial planner to get a solid investment plan that suits your need.
There are host of investment tools which can be deployed strategically for different goals. Marriage and higher education are two greatest money drainers that you need to plan well in advance.
Preparing to get your child married
According to a 2011 survey by a major financial daily, 45% parents invest in public provident fund (PPF) and low yielding fixed deposits. PPF offers the magical effect of compounding, which Albert Einstein dubbed as the greatest mathematical discovery of all time. The interest on the balance in your PPF account is compounded annually and credited to the customer’s account at the end of the year, therefore this gives great returns in the long-terms and is a perfect tool for long-term investment. The interest on such an account is linked to government bond yields. For example, an investment of Rs 100,000 for five years with simple annual interest of 10% would fetch Rs 150,000 the end of tenure whereas the same investment with compounded interest will worth Rs 161,510. This is ideal for planning your child’s marriage since it’s a long-term investment tool which is best utilised in a 15-20 year horizon. HDFC Life’s child marriage planner will help you calculate the corpus needed to fund your child’s marriage when they reach the appropriate age.
Making a scholar out of your young one
Education is the biggest worry for young parents. Given present scenario, education cost is slated to rise higher than inflation and decrease in the value of money as a result of inflation will exacerbate things further. For customers’ convenience, trusted financial services companies such as HDFC Life, provide calculators on their website for their customers to have a fair idea of the corpus they need to meet goals such as funding their children’s education or marriage after a certain time period. HDFC Life’s child education expense calculator will help you identify the corpus you need to have for funding your education later. It’s a well-established fact that equity markets give good returns in the long-term. One could look at mutual fund options
It is important to make sure that your child’s needs are taken care of even in your absence, if fate were to take you away from them for some reason. Child insurance plans such as HDFC SL YoungStar Super Premium offer the dual benefit of insurance and investments. Plans like these are unit-linked investment plans which also give high flexibility to choose from various funds depending on their comfort level and risk appetite and even the ability to switch between different funds in the future. Such a plan not only provides an insurance cover to the beneficiary (child) in case of parent’s death but also provides life benefits on maturity of the plan. There are other benefits such as tax-savings that such investments are entitled to.
About HDFC Life
HDFC Life, one of India's leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life's product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health.