Aditya Birla Sun Life Mutual Fund

5 Investments Options for Securing Your Child's Future Plan - ABSLMF Blog

5 Must Have Investments For Your Child's Future Plan Portfolio

Aug 01, 2019
5 mins | Views 36109

Saving for your child’s education is directly proportional to your regular contribution to your entire financial plan

  • Biggest Cash Outflow is saving for higher/professional degree education

  • 2-year Post Graduate Programme in Management

2018 - MBA course – Rs 22 lakhs approx
2027 – MBA course – Rs 40 lakhs approx
2036 – MBA course – Rs 75 lakhs approx
(Assuming cost of education rising by 7% every year)

Source: https://www.iima.ac.in/web/pgp/apply/domestic/expenses

Lifestyle & Inflation

Standard of living & Inflation = Choice of where to send child for higher education, Child’s marriage in future etc

How to break through?

1. Be the Early-Bird

Don’t underestimate the Power of Compounding - Illustration

  • Current Child Age – 1 year

  • Target corpus –Rs 75 lakhs

  • Monthly Investment Target

2. Aim to invest in Right Options

a. Equity funds can be considered for long term

  • Risk – moderate to very high
  • Category Average returns – 12 to 15%
b. For short term needs such as school fees, uniform expenses, medical etc Debt or money market instruments can be considered
  • Risk – low or moderate
  • Category Average return range – 6 to 8%

3. You can consider Children’s Funds

  • These invest in a combination of Debt and Equity instruments.

  • Comes with a lock in period to encourage long term investing for child

  • Provides an option to start Systematic Investment Plan (SIP)

4. You can invest in Gold for long term

  • Gold can be considered as an investment option

  • Invest through ETFs, Gold Fund or E-Gold

  • Gold can hedge during volatile times

  • You can allocate 10 – 15% of your overall portfolio towards gold

5. Investments and Insurance

  • Prudent to keep them separate

  • Insurance may cater to expenses after one’s demise

  • Aim to take appropriate cover as per your profile

  • Separate investment in Equities/Debt can help build corpus and wealth over long term

6. Skills and Values

  • Invest in child’s skill set – Art, Sports, Technology etc

  • Teach values – Honesty, Determination, Consideration etc

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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