How to plan finances for your child’s education – Forbes Consultant India

There are some common financial goals that everyone works toward—like buying a new car or paying for your child’s foreign degree. The level of planning involved in achieving these goals varies. How often do you set aside money for each goal, how often do you reevaluate your portfolio to check if you are on track, or how often do you check that all of your goals are meeting your set deadlines or No – sets you apart from other savers.

Your Checklist To Do If Your Plan Isn’t Right

Investment markets are volatile and unpredictable; You don’t know how the market will behave tomorrow. Thus, you may not be on time for all your goals, and that is okay if you are off track. What matters here is not that you are off track but your ability to take corrective action to stop it.

Let’s look at some corrective measures that can help you get back and work towards your goal:

check if you have time

You can always delay some goals like a trip to the Bahamas by a few years. This gives you time to deposit money and execute plans when they are ready, but there are incidents that cannot be delayed. For example – your child’s bachelor’s degree. It is something that is inevitable and has a defined goal. While you can push back a master for a few years, generally, you cannot push back a bachelor. To achieve such goals, you must keep an open mind and consider various options to achieve them.

Analyze whether you can narrow down your goal

It works wonders when you put your potential first rather than your aspiration. Suppose, if you have always dreamed of giving the best education to your child, but are short of the necessary funds, you may want to add college preference to your budget to ensure that your child still gets a quality education. /Currently can choose to fit. target fund. If the cost of your child’s college is Rs 40 lakh, but you can save only Rs 25 lakh; You can consider changing colleges depending on your ability.

Review whether you can increase your investment

As an investor, you always want your portfolio to balance your risk appetite and provide you with adequate returns to achieve your goals. Still, the market is not as rosy as we might think. When you see that you are off track, try to evaluate whether you have an opportunity to top up your portfolio.

In a lumpy market, a one-time top-up can often help you get back on track. This only applies if you have the time. Consider this, if you are saving for a child’s education, and in 2021 and 2022 – market volatility has eroded money from your portfolio. To get on track, you can top-up your portfolio with a lump sum amount, if you have more than five years to hit the target.

Find alternative solutions to meet your goals

This is more applicable to unavoidable goals that will come about at a specific time in your lifetime. Like your child’s education. Let’s say you started planning for your child’s higher education early, and your estimated SIP was Rs 10,000, whereas you could only do Rs 7,500.

A difference of INR 2,500 every month will lead to a significant divergence of where you should be versus where you are aiming. Let’s say you have a 10-year horizon for your child’s college; You will have a shortfall of INR 7 Lakhs for college fees. In such cases, you can consider opting for other financial instruments like education loan to fund your balance.

save more every year

It is an excellent tool to achieve your long term goals. To save more every year, you can use step-up SIP option to meet your goals. In Step-up SIP, your SIP amount increases up to x% (you decide on this x%). Since your income is likely to increase by a certain percentage every year, step-up SIPs are a great way to grow your target corpus later in your life.

work together to save more

It is easier to achieve your goals if both you and your partner are consistently contributing towards them. If you plan and agree on your goals with your partner or spouse, a joint agreement can be made regarding goals such as reallocation of funds, contribution amount, change in target amount, etc. .

Study the impact of the market on your portfolio

When managing your finances, you must understand the factors that affect your wealth and overall portfolio. While you may have a financial expert whose advice you find trustworthy, you should do your own study and keep yourself updated to stay on track to achieve your financial goals.

Update your goals and dreams

Humans are social animals; Our needs and wants change with the times. As your family grows or your career progresses, our priorities will change. You may need a bigger car because you now have a husband and a child or a bigger apartment that has room for everyone. Revisiting your financial goals or dreams can help you determine how much money you need to invest or if you need to upgrade certain plans. consider this,

Point A: You started saving for your child’s higher education right from the time he was born. You do not know which course he will choose, and thus, you target an amount of INR X.

point B: After seven years, you find that your child is good at maths and wants to graduate in maths from India. Accordingly, you will adjust the target amount for the math course.

Point C: After another seven years, you find that your child is inclined towards statistics course. Thus, you change the target amount.

point D: Lastly, at the time of admission, your child goes for a course in Data Science abroad, and you need INR Y for the course.

In the above scenario, if you do not update your goal frequently, there are high chances that you will be off track. Your child’s dreams are not stagnant, as above, they want to go abroad for graduation, which means you need to consider currency depreciation costs and high living costs. Thus, it is important to reevaluate your goals and priorities in order to set goals to reflect the revised target.

moderate

As you invest, some investments will do better than others, and each investment will bring a different risk level. You will need to rebalance to ensure that your portfolio always reflects your risk, which is a function of factors such as horizon, income, expenses, dependents, etc. You may need to reallocate your investments to a different asset class where you feel the returns are reasonable and match your risk level. This act is called rebalancing and is necessary to ensure that you adapt every time you are exposed to the market.

Equity and gold are inversely proportional, and when the economy and market change, it makes sense to reallocate funds from equity to gold and vice versa. Also, as you progress and move closer to your target, it is important that you move money from high risk assets to low risk assets and start booking profits in parts.

ground level

As an investor your job doesn’t end when you start investing! You need to ensure that your goals are evaluated and adjusted according to your dreams, are constantly aligned with market changes and your financial needs. Additionally, you need to assess the performance of your portfolio and take corrective action to increase your investment amount or horizon (if possible) to meet the target, if you feel you are on track to achieve the goal. are not.

Finally, it’s good to remember that you always have the option of consulting your financial advisor to help you get back on track and move aggressively toward your goals.

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