Parents want their children to be happy, healthy and to be successful. What connects these desires in a direct or incidental way is ofcourse money. And this video is all about the planning that path which can help achievement the many goals you have planned for your child.
Topics covered in this video
00:00 Introduction
03:06 Where to Invest?
03:57 Insurance (Child Plans)
05:04 Mutual Funds
06:27 Fixed Income Instruments (FDs, Sukanya Samriddhi)
08:27 Gold and Real Estate
10:42 Some Useful Strategies
Four best practices that you can put to good use when managing money for your children
1.Set Realistic goals
2. Stick to a plan
3. Don’t be swayed by short term news and noise
4. Educate yourself
👉 WHERE TO INVEST?
INSURANCE
Child plan is pretty much like an endowment or a ULIP plan but it does have one unique benefit which is, that this plan does not terminate upon the death of the insured parent. However, since the time frame between now and the targeted goal is on the higher side in our opinion, a combination of mutual funds and a term insurance plan can do a much better job by not just earning more returns but also by providing a higher life insurance cover.
MUTUAL FUNDS
these children specific mutual fund schemes are nothing but aggressive or balanced hybrid funds that come with a lock-in period, a high expense ratio .. and often generate average category performance
In our opinion, there are a couple of alternatives to consider here
1 Invest in schemes within the broader hybrid funds
2 Invest in Equities for long term goals
FIXED INCOME INSTRUMENTS
The charm of using these avenues is most certainly the safety that these schemes offer and the perceived notion of their stability. Why perceived?
Reason 1 - Interest rates in these products are not fixed and are subject to change every quarter as one can see in the adjoining table
Reason 2 - Returns in these aren’t inflation beating.
GOLD AND REAL ESTATE
Real estate - the registering, renting, and maintaining of property is hard work and that sometimes it takes years to dispose of a property
Gold - the traditional approach was and continues to be the buying of jewelry or gold coins, which are then kept at home or in a bank locker. While this type of gold does not earn any form of dividend or interest nevertheless Indians do like investing in gold as it has a symbolic connection with auspicious events like a marriage.
Creating a portfolio of diverse asset classes is probably the right way to describe what a parent needs to do. And in that context having a combination of equity mutual funds, short-term debt funds, a Sukanya Samriddhi, a bit of gold and most definitely term insurance. This will not just improve the risk-adjusted return in the portfolio but will also ensure that there is enough liquidity and tax efficiency to work with.
👉 SOME USEFUL STRATEGIES
1. SEGREGATE AND AGGREGATE
No single investment avenue can take care of a child’s every financial need and for that reason, it is important to segregate into short term and long term goals. In addition to improving your cashflow planning efforts breaking your goals by tenure also clears your mind in determining which type of asset class is likely to work best in which case
2. USE SIPs TO ACCUMULATE
Specific to mutual funds .. the systematic investment plan approach to investing continues to be the most disciplined and progressive way of accumulating wealth. SIP don’t need a big outlay and one can start from as little as 500 rupees a month and it is this series of small and automatic accumulations that makes it one of the most popular investing technique worldwide
3. STICK & SIP TOGETHER AS A FAMILY
Family members can contribute a little amount every month towards an education fund for all the children within the family
4. SMARTER TRADEOFFS
The planning for a child’s financial future might also require you to look at some better tradeoffs or choices. For instance, instead of buying physical gold which gives no interest .. what if you instead buy an income-generating asset like a small shop
👉 Resources:
SIP Calculator - www.etmoney.com/tools-and-cal...
Videos:
GOLD : • Best Ways to Invest in...
SUKANYA SAMRIDDHI YOJANA : • Sukanya Samriddhi Yoja...
MUTUAL FUNDS : • Mutual Funds kya hote ...
TERM INSURANCE : • How much term life ins...
ASSET ALLOCATION : • How to do Asset Alloca...
PPF : • Public Provident Fund ...
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