As human beings, I guess there are hardly any stronger aspirations than providing the best of everything for your child/children.
It's the dream of every parent/s to facilitate the best possible upbringing for their child/children and assure the best of future for them.
But for every dream to be realised we have to cross the bridge of multiple realities.
As a parent, the most obvious of the dream would be to plan for your child/children in such a way that all their future requirements are properly taken care of and there is no running around at the time when the actual requirement arises.
And for a proper plan to be in place we need to take into account all the realities of the times that we are living in.
In current times signified by fast up and faster down economic cycles (a lot of uncertainty and volatility; food prices move up and down after a specific time period; the same is true of stock markets, prices of gold, copper, aluminium), it is very well possible that you, as parents, are caught on the wrong foot sooner rather than later.
As the saying goes 'Time and Tide waits for nobody', very soon parents of young child/children would realise that they are staring at times when a particular need of their child/children is staring them in the face and they are found wanting in terms of how to tackle that need.
Higher education and marriage
Two needs which need maximum attention and planning from parents (especially modern day parents) are higher education and marriage.
Within no time, parents realise that their tiny tots have grown up and it's time for them to decide future course of their life in terms of professions they want to take. As a soon-to-be parent, I believe that this planning cannot begin soon enough or prioritised high enough after the child has arrived in the family.
Funding for your child/children's education and wedding is one of the valuable gifts you can give them and it is possible for you to do it in the most uncompromising way. This could be the best asset parents can give to their child/children.
Look at the figures below to get an idea of what could be the expenses like when you start to plan:
Currently the average cost of professional courses like Bachelor's in Engineering in India is around Rs 50,000 per year (This figure may differ from college to college and from one state to another). Add to that other expenses like tuition fees and miscellaneous expenses and the cost per year could very easily be around Rs 100,000.
If we think of the figure for the same course around 15-17 years down the line (when your child/children is/are ready to go to college), we might very well be looking at a figure of Rs 2.5 lakhs per year. That's because inflation (the general rise in prices of goods and services in any growing economy) keeps increasing along with time.
Multiply this figure with four and the average cost of a four-year bachelor's course in any reputed professional engineering institute may come around to Rs 10 lakhs (Rs one million).
Don't get scared by these numbers
The objective of projecting these exorbitant numbers is not to scare the reader but to reinforce the point that once you start your family, the planning for your child/children has to start soon enough. With things changing at a rapid pace around us, I am quite sure these numbers are bound to move only in one direction, that is, northward.
The other event that assumes equal, if not more, importance is the wedding of your child/children. A back of the envelope calculation will reveal that monetary requirement for wedding/s will certainly not be less than what you may need for higher education.
The overall figure may seem intimidating or out of reach at this stage but with careful planning, early savings along with realistic and practical investment approach, it doesn't seem to be necessarily that difficult to achieve.
Starting early and consistency in savings are the two key factors in achieving your child's successful future planning.
How to achieve the objective
The best way to start is with a mix of savings in government securities (like National Savings Certificate, NSC, and Public Provident Fund, PPF) and investments in mutual funds and primary equity markets.
While the former will give you assured, though low, returns that will multiply every year, the latter will balance it out with a possibility of high growth. The first strategy will help you reduce your risks and the second will put you at higher risks with a probability of higher returns.
To achieve the first goal of building Rs10 lakhs corpus for higher education is to start by putting aside Rs 3,000 every month in PPF (Rs 36,000 per annum and following this for 15 years would take your total corpus to approximately Rs 11 lakh; calculated with current rate of 8 per cent returns compounded annually).
And an equal amount of Rs 3,000 per month in equities and MFs (preferably Systematic Investment Plans) should result in the corpus of approximately Rs 10 lakhs (these calculations are done on a conservative returns of 8 per cent per year because such is the nature of the beast called stock markets that it's always good to be on a conservative side rather than be optimistic).
The history of stock market globally has shown that returns are in the range of 8-10 per cent each year over a period 10-15 years.
This mix of savings and investments gives a reasonable degree of safety (capital protection) in PPF and also enables you to take decent risks by investing other half in higher-risk-higher-returns equity class.
Regardless of the method you choose, saving for your child's education and wedding is like any other investment.
The sooner you sow these seeds of savings and investments, better are the chances of your money growing into a big enough tree to provide for the future needs of your child/children.
