Intelligent Investment

The thumb rule being the early planner takes the moolah, which essentially means that planning to meet the expenses on your child’s education should begin well in advance The earlier you start, the longer your investment have time to grow. With the benefit of power of compounding unleashed through regular investment there is significant potential to create wealth and meet goals like child’s education and beyond.

Conventional V / s Contemporary

Parents though wise about investments and education needs, are still not fully aware and informed about the choices they have. Thus the pattern of investment dos appear skewed, what with a majority of parents having only a certain plan for investment, devoid of other options.

No matter what kind of products and schemes are available n the market today, people still opt for the age old scrape and save in the bank approach. While this form of investment might give him some returns, rich dividends cannot be expected caution experts. Moreover the rising inflation the returns one does get from options like a saving account are not significantly high. Inflation is an important hurdle that bloats costs while eroding the value of savings. All is not lost though, what with the market being flooded with several options to pick from. Beginning with mutual funds to systematic investments plans (SIP) to public provident fund (PPF), to NSC equities and age old insurance several modes of investment can be adopted to maximize benefits.

Choose wisely

Optimally using the choices available on and is one thing and reading the fine print before investing is yet another important aspect in the process. Planning investments to secure a child’s education should not be taken lightly. One must be sure that the plan is prepared by a professional and follows a progressive risk profile. This will maximize the chances of the goal being achieved in the long run.

The market is flooded with options that seem to offer better than the best making decisions sometimes can be confusing. Friends advise to opt for SIP though contemplating mutual funds I am quite confused

Financial Planner suggest before buying any insurance, MF, or any other instrument one should ask himself the following critical questions:

1) Time period one is looking at and present cost.
2) Charges – typically insurance carries host of charges viz allocation, admin, mortality etc.
3) Returns – gross return and net return i.e. after all these charges what one is going to get at the end (IRR).
4) Fund manager profile – how long he has been managing the fund, objective of those funds.
5) Compare funds performance vis-à-vis with index (Sensex or Nifty)
6) Lock in period.
7) Taxing for early withdrawals

After carefully evaluating each answer, an investment plan can be charted out keeping maximum gains in mind. Besides disposable dual incomes that most urban Indian families have access to, each is commonly gifted to children too. The initial funds for my son’s account acne from the gifts that he got from his near and dear ones. Subsequently we have now set up a kid’s saving account for him, besides the fixed deposits we have in his name. We are also exploring a good money back policy which we will invest in this year.

Lastly Loans

Last not the least is the options to take a loan for further education, which is a long term commitment. Before taking the loan it is important to understand the ability to fulfill the commitment. Investors therefore need to align the loan amount to the potential return on investments or quality of job payout post education. Post deciding on a suitable loan amount, the individual can conduct due diligence on the interest rates, moratorium period etc.

Many universities have the tie ups with banks in their home country and assist the students in raising loans at lower rates. Many Indian banks are offering education loans to candidates but at different rates of interest. A loan option which allows the candidate to start repaying the principle and interest once he /she starts earning would be a good option. Some banks waive off collateral requirements for students who have acquired admissions at reputed universities since these universities often have 100 per cent job placements records.

As students prepare themselves to be global citizens and succeed irrespective of language and boundary barriers, parents can facilitate their requisite education with thorough planning.

Child age: Zero to five years Investment period: 13 to 18 years

Starting to invest early is like the tortoise and the hare: slow and steady wins the race giving your savings a head start and can give you greater flexibility to invest in higher vehicles and the potential to generate greater returns in the long term. However, if you choose to invest on a regular basis, try and increase the amount every year.

Child age: 6 – 12 years Investment period: 6 to 12 years

You can allocate a part of this portfolio and may still focus on aggressive investment options like equity funds, and a part to balanced funds also to reduce risk. The attempt should be to move money to lesser riskier options, like debt funds as the child grows older.

Child age: 13 – 18 years Investment period One to five years

You should invest in funds that are least risky and overall the focus should be on preserving capital. Also, liquidity should be an important consideration while working out the strategy. While the open mutual funds will ensure that the money is available to you as and you require it, the key is to make the money grow at a reasonable rate.

  • Saebani Hardjono

    This article has reminded us to be smart and carefully to choose the instrument and the institution in investing for the future. More over, the best time to start to invest is early as soon as possible. Saebani Hardjono.

  • s. jaikumar

    Very good and apt informations. Middle class salaried group should follow this for the betterment of their kids.