As a parent, you would want all the joys of the world for your children. And adequate financial planning with mutual funds can help you offer some of these joys to your little ones. Mutual funds in India can be suitable to plan for your children’s higher education expenses. But it is essential to know how to use them to your advantage.
A mutual fund is a pool of investments of multiple investors. The fund manager overlooks this pooled money and invests it further in securitieswith an aim to earn profits,returns so earned, if any,are then further re-invested to make more profit. This is known as the power of compounding.Over time, this helps you accumulate wealth and cater to your financial requirements.
The returns from some types of mutual funds have historically delivered more inflation-beating returns than several other traditional investment instruments. You can use a power of compounding calculator to compare. Moreover, somemutual fund schemes provide tax benefits too.
Steps to invest in mutual funds for your children
Choose the right mutual fund:
There are several types of mutual funds, such as equity funds, debt funds, and hybrid funds. While equity funds can be high risk as they invest in equity and equity-related securities, some of the debt funds areof relatively low risk as they invest in fixed-income securities. Hybrid funds offer a combination of equity and debt and present relatively moderate risk. The returns of each fund may be directly proportionate to the risk. Time horizon plays a crucial role, too. The equity funds can deliver inflation-beating returns but over a longer investment horizon. In contrast, some debt funds may be suitable for the short-term only.
So, the first thing to do is identify your goals, time horizon, and risk appetite and select a mutual fund scheme that aligns well with your requirements. You can use a child education plan calculator to determine your investment goal. .
Consider an SIP investment:
An SIP (Systematic Investment Plan) lets you invest in smaller, regular instalments over timeinstead of investing a large sum of money. This way, the burden of investment gets reduced.
Moreover, SIPs offer the benefit of rupee cost averaging, whereinyou buy more units when the market is low and fewer units when the market is high. Thus, the cost of your investmentis averaged out.
Be consistent:
It is crucial to not lose sight of your ultimate goal and invest in mutual funds consistently. You can use a child education plan calculator to determine your financial requirements to have a clear idea of how much money you need to invest and for how long. Being regular can help you reach your goals at your preferred pace, promotes discipline, and ensures aaims to financially secure tomorrow for your child. This is another reason why you can use the route of SIP investment. SIPs are automated investments. So, irrespective of whether you remember to invest or not, the chosen amount will be invested in the mutual fund of your choice as per your preferred frequency.
Conclusion
It may help to use a child education plan calculator to get a good understanding of your goals. Accordingly, you can choose mutual fund schemes that complement your risk appetite, time horizon, and investment objectives. Remember that the future of your child depends on your financial judgements. So, starting sooner can ultimately benefit your little one!
FAQs
Why is a child education plan important?
A child education plan can allow you to save for your child’s future financial requirements with small yet systematic instalments. It can aim to secure your child’s financial future without burdening you out.
How do you plan your child's future?
You can plan your child’s future by investing in suitable mutual fund schemess that can offer financial growth with your preferred risk appetite.
How are child education expenses calculated?
You can use a child education plan calculator to ascertain your child’s education expenses and the funds required to cover them.
Disclaimer:
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
The calculator above results are based on an assumed rate of return. Please get in touch with your professional advisor for a detailed suggestion. The results are based on an assumed rate of return. The calculations are not based on any judgments of the future return of the debt and equity markets / sectors or of any individual security and should not be construed as promise on minimum returns and/or safeguard of capital. While utmost care has been exercised while preparing the calculator, NIMF does not warrant the completeness or guarantee that the achieved computations are flawless and/or accurate and disclaims all liabilities, losses and damages arising out of the use or in respect of anything done in reliance of the calculator. The examples do not purport to represent the performance of any security or investments. In view of individual nature of tax consequences, each investor is advised to consult his/ her own professional tax/ financial advisor before taking any investment decision.
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.
