PLANNING FOR YOUR CHILD'S FUTURE

While planning for our little ones future there are some rules we need to keep in mind . These rule swill serve as guidelines for financial planning and will help to achieve that target. Below we present a list of Do and Don't while planning for your childs future.

DOs
Have a distinct plan for every objective: Define clearly each objective you wisjh to achieve i.e sending your child abroad for higher education, marriage and such other expenses. The next step would be to have a distinct plan for each objective and allocating resources accordingly. As these objectives will have different time horizon for them to achieve, it makes sense to have different plans working for each objective i.e is if you are looking to send your child abroad after 5 years and want to get him/her married after 10 years then the investment option for both should be different.

Take the help of a financial advisor: Consult your financial advisor to draw your investment plan, and not only drawing up the plan but also monitoring and attaining your financial goal. The financial advisor could play a vital role in attaining your goals.

Take active participation: It is a must to keep a watch on your portfoliothat the financial advisor has drawn for you. Check whether your investments are shaping up as was planned. A little bit of homework is a must; thius will help you take active participation in selecting the right investment avenues. Your knowledge will help you in taking right investment decisions.

DON'Ts
Don't delay the investment activity: The important thing that every parent should take care of is to start planning his/her child right from day one. The earlier you start the better will you be placed. An early starter will benefit tremendously from the power of compounding.

An illustration wil help us understand this better: Say Mr. A and Mr. B both having a one year old kid and would like to save for their child's education, 20 years from now. Mr. A starts investing Rs. 5000 every month for next 20 years, whereas Mr. B starts investing after 10 years and invests Rs. 10000 every month for next 10 years.
The table below shows the corpus of Mr A and Mr. B at the end of 20 years.

The example above clearly states that an investment period for 20 years, Mr. A will accumulate a sum of Rs. 74,86,197, while Mr. B accumulates Rs. 27,52,170. The substantial difference can be attributed to the fact that Mr. A had a longer investment tenure and hence enjoyed the benefits of compounding. Mr. B could not catch up with the corpus accumulated by Mr. A, despite investing double the amount. The bottom line is - it pays to start early.

Don't touch your child's savings: Whatever investments made for the child's benefit should be utilized only for their stated purpose.

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