Have you Planned for your Child’s Education – Their Bright Future?

Children are parents’ treasure and their most precious gift.

"The Joys of parents are secret; and so are their grief and fears. They cannot utter the one; nor they will not utter the other" wrote Francis Bacon, in the sixteenth century, in his essay on "On Parents and Children"

There comes a time in your life when the success of your children somehow becomes paramount. 

The best gift we can give our children is Roots and Wings. We give them Roots through good values, and wings through making them dream, and giving them the financial freedom to live their dreams. As parents we need to provide for fulfilling the children’s aspirations, their dreams and giving them the freedom of choice, to follow what their heart desires.

Most parents plan for their children, especially for the Child’s Undergraduate and Post Graduate education, and marriage or a start up / Business venture.

According to the HSBC Value of Education Survey 2018, Nearly 61% of parents wished they had started saving earlier for the goals. As per another study, the 2017 Birla Sun Life Insurance Company Protection Survey, saving for kids’ education was the top worry for nearly 35% of the 1,540 respondents. 

Parents want their children to have a better life than theirs and according to most parents; education is the foundation for a better life. However the rate of inflation in education has been one of the highest in recent times. 

I passed out of the best convent school in the region, more than 35 years ago and my annual fees was less than Rs 500 per year and this year when my son finished his schooling from the same school his fees was more than Rs 50000 per year, an increase of more than 100 times. In addition, the cost of tuitions and coaching classes, something unheard of in our times, have not been taken into account, which is equivalent to the school fees currently, if not more.

For my Post Graduation at a leading management institute, 30 years ago, my total expense including living expense, travel etc for a 2 year program was less than Rs 50000 and today it will be close to Rs 5 Million, an increase of more than 100 times once again.

While planning for your Child’s education, kindly keep the following in mind:

We always recommend Goal based investing for children’s education and other goals.

In our interaction with various investors, we have identified that majority of parents make some basic mistakes in planning for their children’s financial requirements:

a)   Don’t put a Numerical Figure on the various costs :

b)  Underestimate the impact of inflation and cost of education

c) Delay the planning and start of the investment

d)    Confuse saving with investment and thus miss out on power of compounding

e)   Putting money in the wrong asset class and not rebalancing based on years to goal.

The different asset classes available today in the market are as follows and should be reallocated and re balanced based on various parameters like time horizon (Years to Goal), amount required for goal achievement, risk taking ability etc.

f)   Being scared of Equity and mutual funds due to its volatility without understanding the investment in Mutual Funds

There are different types of mutual funds available which are suitable for different time horizons and risk appetite.

g)   Underestimate the Childs Dreams

This Childrens Day, Plan for your Childs bright future.

Consult your Financial advisor, Start Early, decide on the current cost, factor in the inflation, determine the asset allocation, review periodically, increase your investment every year with increase in income

and Let your Childs dreams come true.

And Finally, shall like to end with a quote from Warren Buffet, the legendary investor, ““I want to give my kids enough so that they feel that they can do anything but not so much that they could do nothing.”

Happy Childrens Day!

Happy Investing!

        Stay Blessed Forever!

      Sandeep Sahni