When thinking of saving for your child’s future, the urgency and priority is heartfelt but usually loses out to procrastination. Especially if your child is still young and you see many years ahead of you when you can save up for future expenses. However, with education cost increasing and lifestyle choices transforming at an exponential rate, planning out your saving strategy and starting it today itself would be very wise. These simple steps can help you map out a plan to save for your child’s future:
Understand your requirement – Knowing how much you will need to save is crucial to calculate your regular saving amount. For instance if your child still has 15 years to pursue higher education and 10 more years before wedding bells should be heard, then you should save for two separate life events. Assuming that higher education will cost approximately 20 lacs INR in any premier institute and another 20 lacs may be required for the wedding. Then your total saving goal should be 40 lacs INR.
Calculate your disposable income and the amount that you can save after meeting your necessities on regular intervals. Saving on a monthly basis can be an excellent start with time at your hand, as the amount to be invested can be as low as Rs. 5000 and yet the returns can be quite satisfying.
Shortlist the saving instruments you are most comfortable with – After you have arrived at a figure which you can comfortably save today , your next priority should be identifying saving instruments that can help you achieve your saving goals. The idea here should be to diversify and save as much as possible using a mix of high return and safe mediums. The following saving options can be very good for a long term investment plan for your child’s future –
PPF (Public Provident Fund) – This is perhaps the most rewarding and safe long term option for parents with a low risk appetite. With a return of 8.75%, 15 year lock in period, tax free interest under 80C and 1.5 lac annual permissible investments; PPF presents a good saving instrument for your child’s future.
Mutual Funds: If you are already short of time and need to accumulate larger some in shorter duration, then Mutual funds can be better suited for you. With an average rate of return between 10-14% and hybrid products in the market, this could be a good way to create wealth for your child’s future. SIP (Systematic Investment Plan) is the most suited long term mutual fund instrument here.
NSC: Just like PPF, NSC (National Saving Certificates) are a government assured way of making long term investments. 5 year plans yield 8.5% return and 10 year plans yield 8.8% giving beneficiaries an option to access regular income after the saving period is over.
Fixed Deposits and Recurring Deposits: Lastly, FDs and RDs are also good for making judicious long term investments with private banks now offering lucrative interest rates.