Have you ever wondered the best way to secure your children’s education? Traditional savings methods are generally deemed a safe bet, but have you considered what mutual funds can do? Imagine them as tools that grow your money and offer adventure and excitement.
In this blog, we’ll explore the world of mutual funds and understand how they are a great companion for your children’s journey! Discover the secrets behind smart investing, understand the mutual fund nuances, and learn how to develop a personalized financial plan that sets your children up for success.
Table of Contents
The Education Dilemma: Which Is the Way to Secure Your Child’s Education Goals?
Saving up money for your children’s future education is one of the most significant aspects of financial planning. Once you know what your child’s goals and objectives roughly look like, you’ll know how much to save accordingly. These savings should also factor in the inflation and the uncertainty of the market movements.
Over the last 15-20 years, the cost of higher education in India has been rising significantly. The cost of a four-year B.Tech or B.E. degree amounts to over 10 lakhs in government colleges, and over 20-25 lakhs in private institutions. The same goes for medical education – if not higher. Imagine that in the next 10 years, inflation rises by 10%, and then it’s probable that the cost of education in these domains may rise to 30-40 lakhs or even more. Meanwhile, an MBA degree may churn out total fees of 25-30 lakhs presently but may rise to 45-50 lakhs in the future.
Please note that these are gross estimates outlined here to provide you with an idea of what form of savings your children’s future may require. There are comparatively more and more engineering or MBA graduates entering the job market contributing to intense competition. Thus, parents need to outline an investment and savings plan over a long period to meet their children’s goals. This should also factor in the future market fluctuations that may or may not influence the overall educational fees.
Secure Your Child’s Education, Invest in Mutual Funds!
Mutual funds can be assumed as a pool of money. Different investors purchase a diversified investment portfolio with stocks, bonds, and other securities that help reduce risks. The different types of mutual funds comprise debt funds, equity funds, and hybrid funds. Each of these funds has its risk-return profiles and should be assessed carefully.
If your goal is to invest long-term i.e., for your children’s education, then a mutual fund is one of the most ideal investment options for you!
Factor in the inflation rate and the estimated educational expenses. This will offer you a better idea as to why investing than a better option than accumulating savings in an educational fund. Investments in mutual funds will expose you to the various asset classes and help diversify the potential risks of individual stock investments.
There are two simple ways through which you may invest in mutual funds – lump sum or Systematic Investment Plan (SIP). However, if the main objective is to invest for educational purposes, SIP is a suitable option.
What Do You Understand By Systematic Investment Plan (SIP)?
Systematic Investment Plan (SIP) is a mutual fund investment strategy where a fixed sum is invested at regular intervals – weekly, monthly, quarterly, or annually.
Imagine that you invest Rs. 10,000 per month in a mutual fund with an expected annual return of 12%. Considering the 20-year investment horizon, your total investment should amount to Rs. 24 lakhs. On the other hand, due to compounding, your total amount could be relatively higher.
Compounding is when your returns earn returns which may increase your investment amount over time. Imagine compounding as a snowball rolling downhill. The snowball starts small which represents your initial investment. But then, when it rolls, it picks up more snow which signifies the returns on your investments. Hence, the larger the snowball, the more snow it picks up. The more time your investment has for growth, the larger your snowball will become. And across the investment horizon, the returns on your initial investment may compound significantly resulting in substantial growth.
The compounding power of SIP makes it one of the best methods for investing in your children’s future. SIP is consistent and disciplined and requires you to invest regularly irrespective of market fluctuations. It is also flexible and convenient as it allows you to start with a small initial amount after which you can increase it.
Overall, it considers that education planning doesn’t happen overnight. It is a long-term goal. So, SIP allows you to enjoy the perks of long-term investing while saving effectively for your child’s education.
Tips You Should Remember While Investing in Mutual Funds!
- Starting early helps significantly because your invested money will have more time to grow.
- Highlight the purpose you’re saving for – to fulfill your children’s education goals. By doing this, you are likely to choose the right mutual funds that align with your risk tolerance and investment horizon.
- Follow the “don’t put all your eggs in one basket” rule. Diversifying your portfolio across different asset classes helps balance the risks and maximize returns.
- Factor in the inflation rate. The educational expenses and other additional charges will likely rise over time. So, choose an investment plan that will consider this.
- Review your portfolios regularly. Your requirements may change in the future, so reiterating the portfolio will help it balance your current goals.
- Don’t withdraw your investment during market lows. As mutual funds perform well over long periods, stay invested to gain relatively higher returns.
- Monitor the performance of your investments. In case a certain fund underperforms, you may switch to a fund that’s performing better.
- Seek professional advice. In case you’re unsure about how to proceed further, seek advice from professionals to create an effective investment plan.
Conclusion
The journey to secure your children’s future is not similar to the challenging climb up Mount Everest. Mutual funds are reliable sherpas beside you that help you navigate the terrain and reach your financial goals. Even small and consistent steps such as a well-planned SIP can lead you to greater heights! Invest in your children’s future – a journey that begins today!
Please share your thoughts on this post by leaving a reply in the comments section. Also, check out our recent post on: “What is Credit Quality in Mutual Funds?“
To learn more about mutual funds, contact us via Phone, WhatsApp, Email, or visit our Website. Additionally, you can download the Prodigy Pro app to start investing today!
Disclaimer – This article is for educational purposes only and by no means intends to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related document carefully before investing.
