Higher education and marriage
Two needs which need maximum attention and planning from parents (especially modern day parents) are higher education and marriage.
Within no time, parents realise that their tiny tots have grown up and it’s time for them to decide future course of their life in terms of professions they want to take. As a soon-to-be parent, I believe that this planning cannot begin soon enough or prioritised high enough after the child has arrived in the family.
Don’t get scared by these numbers
The objective of projecting these exorbitant numbers is not to scare the reader but to reinforce the point that once you start your family, the planning for your child/children has to start soon enough. With things changing at a rapid pace around us, I am quite sure these numbers are bound to move only in one direction, that is, northward.
How to achieve the objective
The best way to start is with a mix of savings in government securities (like National Savings Certificate, NSC, and Public Provident Fund, PPF) and investments in mutual funds and primary equity markets.
While the former will give you assured, though low, returns that will multiply every year, the latter will balance it out with a possibility of high growth. The first strategy will help you reduce your risks and the second will put you at higher risks with a probability of higher returns.
To achieve the first goal of building Rs10 lakhs corpus for higher education is to start by putting aside Rs 3,000 every month in PPF (Rs 36,000 per annum and following this for 15 years would take your total corpus to approximately Rs 11 lakh; calculated with current rate of 8 per cent returns compounded annually).
And an equal amount of Rs 3,000 per month in equities and MFs (preferably Systematic Investment Plans) should result in the corpus of approximately Rs 10 lakhs (these calculations are done on a conservative returns of 8 per cent per year because such is the nature of the beast called stock markets that it’s always good to be on a conservative side rather than be optimistic).