The Best Way To Gift Money To Your Child

By | October 9, 2018

As a parent, it is only natural that you want to provide a good future for your child. If your child is still very young, significant expenses will come later on in life.  This doesn’t mean that you don’t have to worry about costs until the time comes. To accomplish your future goals successfully, begin financial planning for your child’s future today.

The rising cost of education

Today, one of the biggest expenses for a parent is the increasing cost of education. Most parents enroll their children in private schools to provide quality education to their kids. This can be quite costly.

Indian parents spend an average of Rs. 12.22 lakh for a child’s education from primary school to under-graduation, according to an international study. But when it comes to post-graduation, the story takes a different turn altogether.

Impact of inflation

Management students in IIM Ahmedabadpay an amount of Rs. 21 lakh for a two-year postgraduate program. Fees to courses have increased by as much as 7.7% since the previous year.

At this rate, the same program would cost at least Rs. 30 lakh by 2030. So, if your child is planning to crack the CAT exam, you need to start saving now to avoid a rude shock, ten years down the line.

This is not a problem only for MBA aspirants. Analysts believe that higher education in India has the highest rate of inflation. The cost of engineering and medical seats is also expected to rise in the coming years.

For example, if a four-year engineering course costs Rs. 8 lakh today, it could cost around Rs. 17 lakh in another eight years’ time.

Here’s how investing will help reach your goals

These numbers might seem huge now but don’t throw in the towel just yet. Reaching your goals through effective financial planning is possible. For instance, imagine that the required financial goal is Rs 20 lakh. If your child has not yet started his primary schooling, it gives you a 14-year period to come up with the required funds.

Invest in SIP

You could kick off your investment journey by investing in mutual funds through Systematic Investment Plans (SIPs).  For instance, if you invest Rs. 5,000 each month in a mutual fund that offers annual returns of 12%, you could earn Rs. 22 lakh at the end of 14 years.

The best part about SIPs is that you can increase your investment amount every year as your income rises. You can also check out the exciting child-future plans offered by various fund houses specifically for this purpose. Start investing as early as possible to ensure you reach your goal much faster.

However, if you start investing later in life, you will have to put in higher amounts of money to reach your goal. For instance, if you have only ten years to reach the target, you have to invest Rs. 9,400 each month. This can put considerable pressure on your budget.

Conclusion

A good education is the best gift you can bestow on your child. Nevertheless, it is a known fact that the cost of higher education in India is rising steeply. Proper planning and a long-term focus on the investment goal can help you secure your child’s future.

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