Let us consider a scenario here. At the moment, the course fees of a medical degree costs around 6 lakh approximately in an esteemed college. In a time period of 15 years, the education cost is expected to rise by about 10 folds which mean the degree will cost around 60 lakhs in 2032. Majority of the parents are slowly realizing the fact that they are not saving enough for the rising cost of education for their children.
The main financial burden on any parent for child’s future is either related to marriage or education. The cost is on the rise in both cases and it is not going to slow down anytime soon. The only way to find a sustainable solution to this problem of rising cost is to invest the money where high returns are possible.
Generally fixed deposits or PPF are considered safe solution as investment but the return is nowhere near to what the future will require. Thus, investing in equity mutual funds is much better option even in comparison to debt based mutual funds.
The following are the benefits of investing in equity mutual funds:
- Mutual funds investment is done via expert managers who invest the money on your behalf after complete research, analysis and discussion.
- Equity mutual funds have diverse investment portfolio which decreases the risk factor associated with single place investment.
- Mutual funds provide flexibility in terms of returns which is required for safeguarding the future of the child.
- In the long run, mutual funds provide higher and substantial returns which are not possible in short term or low risk investments like FDs.
- The minimum expected return in equity mutual funds is close to 10-12 percent which is much higher than other options.
The best part of mutual fund investment is that when the time of requirement comes, you can simply shift the funds from high risk mutual funds to low risk investments. The flexibility in the terms of liquid cash is the main USP of mutual funds.
How to open and maintain mutual fund for the child?
First of all, you will need to open a minor folio with an option of joint operation for both parents.
The second step is to set up SIPs for maximum possible amount. As the time passes by, you can increase the amount according to your income. When the folio completes a year, revise the SIPs and check if you add funds to any one of them.
Review the performance of the investment and allocate the assets accordingly. You can take help of the investment managers in case you find it difficult to assess properly. For the new investors it is better to take help from the investment managers for the first couple at least.
You need to understand that the amount of investment completely depends on the age of child. Younger child makes it easier for the parents’ to start with lower amounts and increase the SIPs maximum investment with time. Make sure you have a fixed amount in mind which will be your goal for the future. Equity mutual funds make it much easier for the parents to shape a good financial future for the child and you can start investing at any given time.