Why you should start investing early for your children ?
Your time is the best gift that can be given to your children for nurturing them in life. Once you have sown these seeds, their higher education paves way for their bright future. However, education has been getting more expensive with each passing day and hence, it becomes important that you plan for your children’s education needs giving sufficient time for these investing to grow. As every parent wants the best for their child, the financial plan must start as early as possible.
When it comes to saving and budgeting for family matters, women managing household expenses generally have the upper hand. Whether the monthly budgets are limited or not as against the household needs, they have a natural tendency to save a portion of it for any contingencies.
The phenomenon of demonetization led such household savings to see the light of the day for the sake of getting the banned notes exchanged for the new notes.
However, this also brought an important fact into light that such savings generally stay hidden from the financial system and continue to remain mostly in cash. Given the sticky nature of such savings, these can grow materially over a period of time if invested wisely and hence, can add to the financial cushion for your children.
Also, while it is important to investing the savings, it is equally important to choose the right investment option. Traditional avenues with fixed return instruments tend to offer low post-tax returns, and most of the times, are not able to beat inflation. Considering the potential of higher returns through equity-oriented funds and long-term nature of goals associated with children, such funds must be considered for investment.
The historical data suggests that equities tend to generate reasonable returns over the long term. As evident from the performance of BSE Sensex across nearly last two decades (November 2000 to October 2018), a small investment of Rs 5,000 per month from your household budgets into S&P BSE Sensex would have turned into Rs. 40.77 lakh as on October 2018, while keeping it in cash would have made it just Rs. 10.80 lakh. This is precisely the power of equities for your child’s bright future.
Considering the need for a focused approach to saving for the child’s future, especially child’s education, you can look at specific mutual fund schemes which aim to fulfill financial goals pertaining to your child and help allocate savings in a balanced portfolio. The investment
here can be made only in the name of the minor child and comes with a compulsory lock-in period of five years or the time when the child attains majority, whichever is earlier. This lock-in helps you as an investor to stay invested across the market ups and downs, while the fund manager can also invest in the companies with a long-term view.
Systematic savings will help you witness your child pursuing his dreams without any financial stress. This Children’s day, take charge of your child’s future, just like you have been managing your household to perfection