How To Secure Child's Financial Future

Investing in the education of your children is not just a financial decision, but an investment in their future and your own peace of mind.
By following the path of Kula Dharma as mentioned in the Bhagavad Gita, you will not only be securing your child's future but also contributing to your own early sukoon (peace and well-being), advises Vatsal Ramaiya.

Hey Rohan, feeling the weight of responsibility for your child's future? Don't you worry," Vijay Uncle's here with another verse from the Bhagavad Gita: the importance of Kula Dharma (family duty). Just like a wise king who secures the future of his kingdom and heirs, you too can secure your child's future through smart financial planning.

The Fifth Path: Fulfilling Your Kula Dharma

The Bhagavad Gita emphasises the importance of fulfilling one's duties towards one's family. One of your most significant duties is to ensure your child's well-being, including their education. By investing in their future through Systematic Investment Plans (SIPs) within mutual funds, you're not just fulfilling your moral obligation, but also investing in their success and your own future sukoon.

Imagine this: Your children, all grown up and a successful professional, thanks you for the foundation you laid for their education. That's the heartwarming reward for fulfilling your Kula Dharma!

The Gita's Wisdom Applied to Your Child's Future

Here's how the Gita's wisdom applies to your child's future:

• Yudhishthira's Righteousness (Raj Dharma): Yudhishthira, the eldest Pandava, was known for his righteousness. By investing in your child's education, you're demonstrating similar righteousness, ensuring their opportunities for a bright future.
• Krishna's Message of Long-Term Perspective: Lord Krishna emphasised looking beyond the present. Investing in your child's education is a long-term investment that yields rich dividends in the form of their success and your future happiness.

Investing in Your Child's Future: SIPs within Mutual Funds

The Bhagavad Gita teaches us about strategic planning. Here's how SIPs within Mutual Funds can help you achieve your goals:

• SIPs for Discipline and Rupee-Cost Averaging: Think of this as Arjuna's Focused Archery (Ekagra Lakshya). SIPs allow you to invest a fixed amount regularly, like monthly or quarterly. This instils financial discipline and benefits from rupee-cost averaging. You purchase more units when the price is low and fewer units when the price is high, potentially balancing out the impact of market fluctuations.
• Mutual Funds for Diversification and Growth: Imagine this as Arjuna's Diversified Arsenal (Vichitra Astra). Mutual funds offer a wider range of investment options, allowing you to potentially grow your capital at a faster pace. Here are some mutual fund options to consider for a long-term investment horizon aligned with your child's educational needs:
• Children's Funds: These are balanced mutual funds specifically designed for child education goals, often with a mix of equity and debt instruments.
• Balanced Funds: These offer a mix of stocks and bonds, providing some stability while aiming for growth.
• Equity Funds: These invest primarily in stocks and can offer potentially higher returns, but also come with higher risk. Choose an equity fund with a moderate risk profile suitable for your investment horizon.

Let's Plan! Examples with SIPs and Mutual Funds

"Alright, Rohan, let's get down to brass tacks! Imagine you have two children with different educational aspirations. Here's how SIPs in mutual funds can help you achieve their goals:

Scenario 1: Engineering College in India

• Target Corpus: Rs 25 lakh (This is an estimate and actual amount may vary depending on the specific college and future educational expenses)
• Investment Tenure: 18 years (Assuming your child is just starting kindergarten)

Moderate Risk Approach: Considering a moderate risk profile, you can explore balanced mutual funds or children's funds. A SIP calculator (remember, these are estimates) suggests that an investment of approximately Rs 8,000 per month could be required to reach your target corpus in the given tenure.

Scenario 2: Medical School Abroad

• Target Corpus: Rs 1.5 Crore (This is an estimate and actual amount may vary depending on the university and future living expenses)
• Investment Tenure: 20 years (Assuming your child is young but you anticipate that he will have future medical school aspirations)

Long-Term Growth Approach: Given the longer tenure and higher target corpus, you may consider a more aggressive approach with a balanced fund or even a diversified equity fund.

A SIP calculator suggests that an investment of approximately Rs 30,000 per month could be required to reach your target corpus. However, remember, this is a significant financial commitment, and consulting a SEBI-registered financial advisor is crucial to assess your risk tolerance and create a personalised plan.

Beyond SIPs and Mutual Funds: A Multi-Pronged Approach

The Bhagavad Gita teaches us about well-roundedness. While SIPs and mutual funds are powerful tools, consider these additional options for a holistic approach to your child's future:

• Utilise Government Schemes: Explore options like Sukanya Samriddhi Yojana (for girl child) or National Savings Certificate (NSC). These offer attractive interest rates and tax benefits.
• Life Insurance: Consider a child plan that provides financial protection in case of your unfortunate demise. This ensures your child's educational goals are not jeopardised.
• Education Loans: Remember, education loans are an option for future needs. By planning and investing early, you can potentially reduce the loan burden on your child.

"Remember, Rohan, investing in your child's education is not just a financial decision, but an investment in their future and your own peace of mind. The Bhagavad Gita reminds us that fulfilling our duties leads to a sense of fulfilment. By following the path of Kula Dharma, you're not only securing your child's future but also contributing to your own early sukoon (peace and well-being)."

• Please click HERE to read earlir articles on How To Retire Early

Vatsal Ramaiya is a personal finance expert with 16 years of experience with India's top mutual fund houses. He blogs at mfnow.in.

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