This era of globalization has presented more and more options to the people. Not only for you, but more than one option has emerged in front of your children. The desires of children have also increased and the craze towards studying abroad is increasing among the younger generation. However, its cost is very high and it continues to increase. Education inflation in India is 10-12% per annum, but even if 6-8% are considered as inflation, there is going to be a huge expenditure on education in the future of children. In such a situation, it is not right to delay the financial plan for the future of the child and should be given immediate attention. For this, you should start investing as soon as possible.
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Special tips for children’s future planning
- Start investing as soon as possible: Whatever be the goal, it is always important to start investing as soon as possible for any future needs. You may have your own desires as the child grows up, but as a parent, you should start preparing in advance. Assess the expenditure on the education of the child in future and keep inflation in mind in this calculation. Now adopt the required strategy to achieve this financial goal. Start investing and saving for children’s education as soon as possible so that you can take advantage of compounding which can give a lot of benefit in the long run.
- Sukanya Samriddhi Yojana: If you have a girl child below 10 years, then Sukanya Samriddhi Yojana is the best and affordable plan among all the options available in the market at this time. You can open Sukanya Samriddhi account in multiples of just Rs 250 and after that Rs 50. It is mandatory to deposit at least 250 rupees every year to keep the account active.
Under this scheme, there is a lock in period. You cannot withdraw money till the child is 18 years of age. Its tenure is 21 years old, but after the child is 18 years old, he can withdraw some amount from it. However, this amount can be withdrawn only for his education expenses. Apart from this, withdrawal of money is allowed in the event of medical emergency after 5 years. Under this scheme, interest is usually received at a higher rate than PPF and no tax is to be paid on it.
- Insure yourself: The biggest threat to a child’s aspirations is the absence of their parents. If the child is financially dependent on his parents, then in the event of his death or disability, there is a fear of disintegrating the plan made for the future of the child. In such a situation, it is important that parents must keep their own term and health insurance. Whenever a new member joins your family or increases your income, you should adopt a strategy to give more protection to your family by reviewing it.
- Scheme for education of children: The trend of studying abroad far away from home among the younger generation is increasing rapidly and in such a situation, parents should start making financial plans for it 10-15 years in advance. For this, firstly the cost of studies in future should be estimated. In simple words, if spending on education abroad is coming to 20 lakh rupees today, then at the average inflation rate of 6 percent, this figure will be 50 lakh rupees. To achieve this goal, one should invest in better capital by diversifying between risky and secured instruments. Such as Nifty 50 index funds or guaranteed insurance plans can give better benefits of compounding in the long run and this can be achieved in future without taking loans.
- Cultivate good habits about money in children: It is very important to develop good financial habits in children after a certain age so that they can manage their money better. Setting pocket money every month, giving them information about budget and tax are some important lessons that children must be taught. These rules will be very helpful for children when they are living far away from their family or have started earning.
(Anup Seth, Chief Retail Officer, Edelweiss Tokio Life Insurance)