Every year on 14th November, we celebrate Children’s Day. Everyone who wishes to live a pure happy life like a child, a child lies within them. But as we grow older, the responsibilities of life increase and somewhere in this journey, we lose the sheer joy of life as a child. So, most of the time, we observe that many parents plan for their children to fulfill their dreams, which were unfulfilled in their own life. Children and their progress is an essential part in every parent’s life. Their only desire is to give their child the best in life. It is the goal of parents when it comes to child education that their children get admission to a good school, get higher education in the best institution, and have success in the field of their choice.
As Benjamin Franklin said, “ Investment in knowledge pays the best interest”, Parents always seem to give higher education to their children. That’s why the cost of education is an important factor for parents. A large corpus of their income and savings is spent on educating their children. Also, the expenditure on education is constantly rising. Hence, having proper financial planning for children’s education and their dreams is a necessity. The sooner you start investing to build this corpus the better will be the result. Let’s understand the factors that should be considered while planning for child education or marriage.
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Determining the time frame:
While planning for child education or marriage, you need to consider some aspects like how old is your child today? How much time is left for his graduation or post-graduation? What would be the approximate expenses for his/her marriage? If you have a major timeframe to plan these things then you have a great opportunity to invest for your child which will help to generate more corpus in the future.
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Estimate the expenses:
First of all, you need to estimate the possible expenses for your child. For that, it is necessary to consider some factors like whether your child will study domestically or abroad. Good educational institutions in his prospective field are available in the country or abroad, should he/she pursue graduation abroad or just post-graduation? What is the potential cost for both? To calculate this cost, you should consider today’s cost of education along with inflation. To understand it in a precise way, follow the chart below:
| Type of Education | Today’s cost | Educational Inflation | Approximate cost after 10 years | Approximate cost after 15 year | Approximate cost after 20 years |
| 10th Std | 1,00,000/- | 10% | 2,59,374/- | 4,17,725/- | 6,72,750/- |
| 12th Std | 2,00,000/- | 10% | 6,27,686/- | 10,10,894/- | 16,28,055/- |
| Academic Degree | 10,00,000/- | 10% | 34,52,271/- | 55,59,917/- | 89,54,302/- |
| Professional Degree | 15,00,000/- | 10% | 75,81,705/- | 1,22,10,412/- | 1,96,64,991/- |
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Analyze your current Financial condition:
Analyze your current savings, investments, assets, and liabilities. Make a list of them. It will help you to plan in a better way. Also whatever investment you are doing for your child’s education or marriage, be sure it will be used for the same purpose only. I have seen, in many cases, people start their savings and investments for one financial goal and use it for another purpose. Never do that. It will destroy your financial planning. Always give a goal to every financial investment and use that corpus for the same goal only.
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Understand the investment amount:
Once you decide the time frame for investment, estimate your expenses, and analyze your current financial conditions then understand how much amount you need to save and invest every month to achieve your goal. After calculating the monthly investment amount, analyze it with your monthly income and expenses. If you need more savings to achieve your goal, then cut down on unnecessary expenses and try to save more. If you regularly invest towards your goal and top up it whenever possible then you will be able to achieve your goal before the decided tenure too.
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Invest wisely:
Don’t put all the eggs in one basket. Focus on asset allocation while investing. Before investing, understand the product first. Understand the risk, safety, liquidity, returns, and tax treatment associated with that product. As you need a huge corpus for your child’s education or marriage, the investment product you select must beat the inflation then and only then can you achieve your target with your planned savings. If you find it difficult then don’t hesitate to take professional help for the same. Your one wrong decision may kill your financial as well as life planning, so invest wisely.
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Take adequate insurance coverage:
Life is uncertain. If you are the only earning member of your family then you must have adequate life insurance cover. Unfortunately, if any family loses the earning member of the family, who was the only earning member of that family then it will affect the financial life of the whole family. By taking enough life insurance cover, you can keep your family tensionless even in your absence.
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Be ready with Emergency Fund:
Even though we plan from all the corners of savings for our financial goals, life throws some surprises or unexpected situations like some calamities. It may be a COVID situation, health issues, job loss or anything else which we did not expect to happen. Having enough emergency funds will help you to overcome those challenging situations fearlessly. If your child chooses a different field than decided, or required expenses are more than estimated, then in those situations an emergency fund will be helpful.
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Make an early start:
After deciding the time frame for your investment, estimating the expenses, understanding your current financial condition and being done with your planning, now it’s time to execute that planning. The earlier you start, the better the results will be. As the tenure is the most effective part of the investment, if you start early then you will get more time to invest and to get desired returns. This can reduce the amount needed for saving compared to the needed amount of saving in the delayed investment. Don’t procrastinate as it can affect your child’s future.
Last but not least, by investing in your children’s education and also teaching them the value of saving, you are laying the foundation for their future success. It’s a gift that transcends material possessions, offering a lasting legacy that can shape your child’s future for years to come. By starting early, being consistent and inculcating good financial habits, you are providing your child with the tools they need to achieve their dreams and navigate life’s challenges.
As you celebrate this children’s day, remember that one of the greatest gifts you can give them is the gift of financial security and independence. Start your savings journey today and watch as if their future grows brighter with each passing day.
Happy Children’s Day!