Few years back, it was a joyous time for our family as my father-in-law had just bought his dream house. We had purchased the house from an acquaintance who had to sell the place as his son aspired to be a pilot, the training fees for which were very steep. Something struck me that day how parents would go to any lengths to fulfil their children’s dreams.
For any parent, one of the foremost priorities they have for their children apart from health is education. One cannot stress enough the value of quality education as a key enabler to achieve excellence in life. It was at the same time that we were looking to enrol Ayaansh in one of the best schools. The ordeal of first choosing the appropriate Board for my child and then searching for the school was certainly overwhelming. As we opted for ICSE, we further realized how the pre-primary education itself would cost a lac annually vis-à-vis our entire education (from kindergarten to post-graduation) for which we ended up spending only a few lacs.
We welcomed our second son last year and having already experienced expenses incurred on not just education but in general (raising a child), it further re-emphasized the need to plan our finances judiciously. Education is an investment which is:-
- Non-discretionary – we would never compromise on quality of an education
- Constantly rising – inflation! Year on year increase in fee structure
- Staggered over a long-time horizon (especially now with preference for post-graduation, sometimes even abroad).
As a family of 4 now, we knew that the general living expenses, medical expenses, vacation, insurance, wedding are only going to increase many-fold and hence the need to save and invest became paramount. Hence, we quickly realized the need to make a conscious effort to make the right investment plans so that we are well placed to cover for expenses subsequently in our children’s journey.
Planning & Execution
That is when we landed up at the L&T Education Calculator to give us insights into our potential investment needs. We found the page to be very interactive as it asks for few details like a) what your child aspires to be, b) local or international preference for higher education, c) your current lump-sum savings to-date, d) average rate of inflation, and e) your current monthly savings towards that goal. The tool provides an estimate of how much monthly investments need to be done by us to meet our goals and we also receive the report via email for our ease of reference. I also understand that it’s difficult to anticipate what career path my children might take, especially given the plethora of options and increasing risk-taking appetite of the current generation. But planning for varied scenarios with the tool helps you to be better equipped to handle those uncertainties and there is no harm in accumulating a larger corpus than the eventual actuals.
Now that we know the value one needs to invest, the next question is what are the products available in the market to help us achieve that objective? You can invest in Fixed deposits, Real estates, Gold, PPF, Recurring deposits and many other avenue options which you can check on the internet. Given our goal was medium to long term in nature, we decided to explore Equity investments, given it can help you beat inflation in the long run. Since we did not have enough time to follow the markets, we felt Mutual Funds, which are managed by professionals, were an apt investment avenue for us. Although they are subject to market risks, we were comfortable with the risks related to market volatility since our investment horizon is over a long term. We also referred to the L&T Mutual Fund SIP page, and realized that Systematic Investment Plan (SIP) is the appropriate tool to invest in these mutual funds. SIP helps you to build discipline and continue investing in the highs and the lows of the market thereby averaging our returns, but still managing to bear inflation. We also used the SIP Calculator to determine the monthly amount we will need to invest in achieving a particular goal in a particular time period. Also, within Mutual Funds, we opted for ELSS (Equity Linked Saving Scheme), as it provided dual benefits of upsize potential of returns while also helping us save taxes (investments eligible for tax exemption limit as per current tax laws).
So, by starting early, we now have the confidence to be able to facilitate our children in chasing their dreams. While it’s the first step, we also understand the importance of revisiting the goals periodically and making the required corrections. All these steps would go a long way in not only meeting your goals but also preparing for any unforeseen events in life.
Always have the habit of reading the scheme related documents before investing to understand the scheme type, investment patterns and the risk factors associated with particular investments and consult your financial advisor to understand the implication of any investment.
Disclaimer: This information is for general information only and does not have regard to the particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax, and financial advisors before investing. The recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.