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Why you should plan for your child’s education?
Posted: May 23, 2022
College is costly, and it will only become more so in the future. Every parent wishes they could provide their children with the best education money can buy. Parents are generally unprepared for their children's higher education because they focus on short-term goals. They end up stretching their finances by taking out loans that may be beyond their means to repay, as well as pledging or selling their assets. As a result, it is critical to begin investing in your child's future with a child insurance plan as early as possible.
Building a substantial education fund for your child education investment plan starts early. Along with getting a head start, diversifying your investment portfolio is critical to achieving the financial goals you've set for your child's education investment plan. The sooner you begin contributing to your child's education fund, the larger the corpus will grow, allowing your child to pursue their dreams without financial constraints. You can also have a monthly investment scheme.
What to look for in an investment?
The three features to look for before investing are SLR (Safety, Liquidity, and Returns).
The issuer's ability to repay the principal and interest is referred to as safety. The lower the return, the higher the safety. In contrast, the higher the risk, the higher the reward. A secure investment is one in which your life is unaffected by the amount you invest or the amount you lose. Never put money into an investment that you can't afford to lose. While the investment you're making is safe, you want to make sure that no matter what happens to it, you'll be able to live comfortably. Budgeting everything is a great way to figure this out.
Liquidity in financial markets refers to how quickly an investment can be sold without depreciating its value. The more liquid an investment is, the easier it is to sell it for fair value or current market value (and vice versa).
When all other factors are equal, liquid assets trade at a premium and illiquid assets at a discount. The most liquid items on a company's balance sheet are typically listed first. As a result, cash is always listed first in the asset section, followed by other types of assets like Property, Plant, and Equipment.
Returns are the earnings generated by an investment over time. Return on investment (ROI) is a performance metric used to assess an investment's efficiency or profitability, as well as to compare the efficiency of multiple investments. ROI attempts to directly measure the amount of profit made on a given investment in relation to its cost.
Which financial instrument to invest in?
Equity shareholders, government securities, corporate debt, bank deposits, fixed income, National saving certificates, post office time deposits, insurance, mutual funds, and money market instruments are among the investment options available today.
Mutual funds are an excellent way to invest in your child education investment plan. The most significant benefit of investing in mutual funds is that they can provide long-term inflation-beating returns while also avoiding capital gains taxes. Mutual funds are managed by professionals with experience cherry-picking stocks and are well-diversified across stocks and industries.
Parents can invest in mutual funds to build a diversified portfolio to help fund their children's education. Mutual funds are a type of investment that yields a higher return over time. It's a group of investors who pool their money to invest in stocks, bonds, and other market instruments.
Equities are the primary source of funding for any company that allows shareholders to vote and claim assets. If you invest in equities, you have a good chance of getting a return that is twice or three times your initial investment. However, the risk factor associated with equities is also very high.
- Establish a minor account.
- A diversified portfolio of large-cap equity funds and debt funds will be ideal if you have more than 5 years before college enrolment.
- The portfolio should increase debt and balance fund allocation less than 5 years before college enrolment.
- Regularly review the portfolio to see if the funds are performing as expected.
Help from an expert financial planner
Financial planners can assist you in organizing and planning your finances. They project what you'll have when you're ready to retire based on your current income, savings, and investments. They can also assist you in deciding what to do with your money in order to achieve your objectives.
The quality of the advice you receive is directly proportional to the planner's level of education, training, and skills. If you manage your own finances, a planner can usually assist you in improving your plans.
In addition to financial planning, some planners provide investment advice and investment management. Investment advice can range from general asset allocation model recommendations to specific buy-and-sell recommendations.
Start early on in building a substantial education fund for your child education investment plan. Because they are focused on short-term goals, most parents are unprepared for their children's higher education. The sooner you start, the larger the fund will become, allowing your child to pursue their dreams without financial constraints. SLR is one of three features to look for before investing (Safety, Liquidity, and Returns).
Mutual funds are a great way to put money into your child's education fund. Never put money into an investment that you can't afford to lose. A secure investment is one in which the amount of money you invest or lose has no impact on your life. Liquidity refers to the speed with which an investment can be sold without losing value. The easier it is to sell an investment for fair market value, the more liquid it is. Return on investment (ROI) is a metric for determining the efficiency or profitability of an investment. Safety refers to the issuer's ability to repay the principal and interest.
The most significant advantage of mutual funds is that they can provide long-term returns that outperform inflation. Mutual funds are well-diversified across stocks and industries and are managed by professionals with experience cherry-picking stocks. A monthly investment plan is also an option.
WC Securities is one of the best service providers of mutual fund SIP. We have the best financial advisors in our financial planning company who can help you grow your wealth by investing in mutual funds.