Financial Planning for Children Education

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Child Insurance Plans
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Financial Planning for Children Education
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Financially our lives can be divided into long
terms goals and short term goals. The short term
goals could range from taking a foreign holiday
or buying the latest LED television in the
market. Long term goals are usually far away in
the horizon. However, you start investing because
of their future value. Fortunately for parents,
there are enough investment products to help them
fulfill the dreams for their children. Chosen
appropriately, these options can help you save
enough to send your daughter to the best college
in the country, or book a 5-star hotel for your
son's wedding. No concession in life insurance
premium or special interest rate or return will
be offered for the investment meant for your
childs higher education. The choices will
largely be dependent on these four factors
Introduction
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Time period of the investmentThe tenure of
investment is dependent upon how early or late
you start investing for your childs higher
education. If you start early it allows you to
take risk and aim for higher returns from
equities. The longer period also reduces the
overall risk. However, if you are starting late
then you will have to go for schemes that will
have modest returns preferably with capital
protection.
Risk appetite
As an investor if your risk taking appetite
borders on the higher side, then take a leap and
invest in equity oriented mutual funds. Equities
have often been known to generate the best
returns over a long period of time. You will also
have to bear with fluctuations of the market at
the same time and cannot allow slight volatility
to affect your nerves. However, if you have low
or moderate appetite for risk then you may invest
in balanced funds, capital protection fund or
even debt funds. The other option is to opt for
traditional form of investments like fixed
deposits, postal saving, PPF or Sukanya Samriddhi
Scheme if you do not want to take any risk at
all. This will provide security of assured
returns.
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The overall returns generated
It is your responsibility to keep a track of your
investments. The investment segment focused on
your childs higher education should generate a
certain percentage of return annually. The return
is crucial to the creation of the corpus. Hence,
if any of the funds are under performing then you
must consider switching funds or making
additional investment to compensate for it. The
overall return generated is crucial to the corpus
your child will require for the higher education
purpose.
Taxability of the income and returns
Let us assume that you have invested in fixed
deposits and along with the principal and the
interest accumulated you have created a corpus
for your childs higher education. However, when
you are about to withdraw, then the gains are
taxable or treated as an income and you have to
pay an income tax according to your income slab.
After the tax deduction you have fallen short of
the predetermined amount. Hence, while
determining the goals, you must take possible
taxations into consideration.
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Conclusion
One always expects the best from their children.
As parents you push them to work hard and aim for
excellence. However, the same needs to be
reciprocated by you. A shortage of funds, when
you could have created a corpus, is not an excuse
to deny your child the best education. Do not
fool yourself by thinking that your child is too
young and you will utilize this time to focus on
other life goals. Start early to avoid shortages
and make the best out of your childs life.
Sourcehttp//bit.ly/2cYzOEG
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