How to generate funds for the kids education 15 years from now?
By Madhurie Singh, March 14, 2012
I got a few mails from worried parents, stating their shock! Well the whole idea is not to shock you all, but to help you assess your current position of finance and your future abilities to fund your childrens’ education.
Life is very funny. When we see something close by we get ready for it with all enthusiasm. But when its far off we tend to ignore its gavity, importance and its value.
If I tell you today that you will have to spend Rs 50 laks for your kids education in 15 yrs from now, you will defintely sit up and start thinking about it. Else you will have no clue of why it is not important to buy that latest 3D TV irrespective of how much you love it and want to own it.
Needs and wants have to be clearly redefined and more so today when the inflation has its own size and our pockets remain marginally same.
My sons came back from a rich friends home and were telling me how he has a mobile of his own, a TV in his room and a farm house that has 3 horses, dogs, turtle and ducks! The younger one is fond of cars and will not go below Bugatti!
They wanted to know when I will buy all these for them!,
So I knew time to set their needs, wants and expectations right.
After an hour of talking, discussing, quzzing they both said they donot want any TV, mobile or farm house but the Bugatti is all they crave for now!.
That was last year and so now they were ready to understand little more. And I had started them on earning money for every daily chores they do, good values they inculcate and finish their studies and activities without coaxing. Teaching children how to save money early.
And they were pretty surprised to see their money grow in such fantastic way. BTW I started their monthly SIP in December, when the market was really low and hence the growth they can see is really encouraging.
They are happy saving but it is important for them to know what they can buy if they keep that money for 10 years! So I thought of finding the future value of all the stuff that they will have to buy including the Bugatti car!
And that’s when I came face to face with the future costs of the educational fees. I have not gone into donations since I do not believe in it. Nor have I written about study cost in US or UK or Australia or any other country, which will be a series of posts I guess.
Now the big question? How should you save to meet these incredibly high study fees for your kids?
- First thing first. You have to assess your child and imagine which career line he/she will choose based on his/her potential
- You can write to me for assessment of your child based on intelligence, aptitude, physical potential, happiness index of the child.
- Then find out the current cost for the course your child might be interested in.
- Next search for websites which calculate the future value of the current cost based on inflation rate of say 7% for 15 yrs.
- That is the fund you will have to be ready with in future.
- Now call up the person you trust to help you make a financial plan based on your goal. He/she must be not linked with any insurance company or should not be selling any financial product lest you are forced to buy useless products.
Only if you trust a financial planner you must buy any product, else work on your own. We are all software engineers, doctors, architects, designers , MBAs etc etc so you need not be intimidated by financial terms and jargons.
Just spend some time and you will learn how to plan your funds. Most importantly, start it right away.
Some of the products you must seriosuly read about before investing are:
- SIP ( systematic Investment Plans) in Mutual funds for long term goals (10-15 yrs).
- Recurring deposits for shorts terms goals(1-2yrs) to meet your sudden demands. Which you can every year invest in good stocks when the market is low.
- Invest in stocks long term(10-15 yrs) only in very good companies that are blue chip and will never vanish. Keep a track on the market and whenever the market goes high sell a percentage to make profits. That will be the key to achieveing the goals. Forgetting your stocks is never a great idea.
- Do not invest in silly ULIP products now. If you have done in past leave them as it is.
- Do Not buy silly LIC products, they do not give good return.
- Buy pure term plan to cover your life . Ideally Add all your liabilities (loans and yearly expense) and multiply by 2 or atleast 1.5.
- Buy health insurance plans which you can buy online only. Remember if there is any thing that needs an agent to sell the product, the product will be expensive as the agent will be making commission at your cost. Go to www.policybazaar.com . I would recommend a Family floater plan of Rs 3-10 lacs. DO NOT go for individual plan as long as you are under 45yrs. When you are 44yrs, buy another family floater for you and your spouse minus kids. So you will have two health policies other than coroprate health policy when you are 45 yrs old.
- And last but not the least start saving today, spending less, eating out less, watching movies less in malls, buying less latest brands and growing a thick skin to counter the friends and family who will be foolishly showing off their wealth. Trust me you will be wealthier in true sense 10 years from now than them :
- Stay away from advisors, agents, bank relationship managers, investment planners as they are just recent pass out from MBA colleges, trained on products that they have sell to meet their targets. They can never understand your family goals, needs unless they have gone through the same, lived in the same past like yours and dream the same dream like you.
It is easy to say but I will still say it. Do not get lured by your neighbors’ luxuries. You really have no clue if they have any future plan like you or not. You have no clue if they are earning black money which must be spent in these luxuries only as they cannot be accounted.
Start coaching your kids about money, savings, future value of money, inflation, insurances, deposits and stock.
Do not underestimate their ability to understand any of these terms. My kids have understood and so can your.
Build a relationship with your porfolio, nurture them with patience, love, regular funds, extra bonuses, reviews and no one can stop you from becoming your family’s best financial planner, advisor and fund manager.