Being a Loving parent is not enough. Be a wise parent.
We would like to emphasis the need to be a WISE parent. As we know every one of us love and care for our children and we struggle hard in our life only to make our children good citizens of tomorrow. All of us dream to see our children taking up a good career in their life. We wish to see our sons and daughters settle down comfortably in life.
If you agree with what we believe, then you must spend some of your precious time to read this write up. We are sure, this will definitely be a turning point in your child’s future.
Your child’s education is just one of your many responsibilities as a parent. Unfortunately, in these times of rising prices and inflationary trends, the cost of education is going up by leaps and bounds. No longer is it enough to ensure that your child passes with good marks every year. Once in college – whether engineering, medical or any other specialised field of study – the cost of educating him further may go up dramatically. Equally important is the cost of marriage, 10 or 12 years hence.
Have you ever thought about the COST for educating your children? If not, read further.
Let’s take a simple example. The cost of a professional degree is around Rs.250,000/- today. If your child is one year old today, it would cost at least Rs. 12.63 Lakhs when he is 17 years old (assuming a 10% annual inflation rate)! In fact, the inflation rate could be higher!
Here’s a ready reckoner of probable future cost for a good professional degree for your child.
| Escalating cost of Higher Education | ||
| Year 1990 | Engineering Medicine MBA | Rs. 100,000.00 Rs. 50,000.00 Rs. 30,000.00 |
| Year 2000 | Engineering Medicine MBA | Rs. 320,000.00 Rs. 500,000.00 Rs. 240,000.00 |
| Year 2010 | Engineering Medicine MBA | Rs. 830,000.00 Rs. 1300,000.00 Rs. 620,000.00 |
| Year 2020 | Engineering Medicine MBA | Rs. 21,50,000.00 Rs. 33,60,000.00 Rs. 16,20,000.00 |
What should a parent do ?
Given the huge increase in the cost of a professional degree over the years, there is no alternative to saving and investing, right away! Do the prudent thing as a parent. Try and estimate the kind of liabilities that would arise, to fund your child’s education or marriage in future.
Proper planning, saving and investment today can ensure that you are not caught on the wrong foot in future! Whether your child is just one year old or 15 years old, it is never too late to start saving and investing.
JUST REMEMBER, YOU MUST STAY INVESTED FOR THE LONG TERM.
Here’s another ready reckoner that will help you determine the amount you may need to save regularly, to generate a sum of money over the long term.
| Monthly Savings – What your monthly savings for child may generate. | ||||
| Savings per month (for 15 years) | Total amount invested (Rs.) | Amt Receivable @ 12% p.a return | Amt Receivable @ 15% p.a return | Amt Receivable @ 18% p.a return |
| Rs. 5000.00 | Rs. 9.0 lakhs | Rs. 25.20 lakhs | Rs. 33.80 lakhs | Rs. 45.90 lakhs |
| Rs. 4000.00 | Rs. 7.2 lakhs | Rs. 20.20 lakhs | Rs. 27.10 lakhs | Rs. 36.80 lakhs |
| Rs. 3000.00 | Rs. 5.4 lakhs | Rs. 15.10 lakhs | Rs. 20.30 lakhs | Rs. 17.60 lakhs |
| Rs. 2000.00 | Rs. 3.6 lakhs | Rs. 10.10 lakhs | Rs. 13.50 lakhs | Rs. 18.40 lakhs |
| Rs. 1000.00 | Rs. 1.8 lakhs | Rs. 5.00 lakhs | Rs. 6.80 lakhs | Rs. 9.20 lakhs |
| One Time Investment – What your savings may generate. | |||
| One time Lump sum amount invested (Rs.) | Amt. Receivable @ 12% p.a return (after 15 years) | Amt. Receivable @ 15% p.a return (after 15 years) | Amt. Receivable @ 18% p.a return (after 15 years) |
| Rs. 200,000.00 | Rs. 11,78,321.00 | Rs. 18,21,027.00 | Rs. 28,05,482.00 |
| Rs. 100,000.00 | Rs. 5,89,160.00 | Rs. 9,10,513.00 | Rs. 14,02,741.00 |
| Rs. 50000.00 | Rs. 2,94,580.00 | Rs. 4,55,257.00 | Rs. 7,01,370.00 |
| Rs. 20000.00 | Rs. 1,17,832.00 | Rs. 1,82,103.00 | Rs. 2,80,548.00 |
| Rs. 10000.00 | Rs. 58,916.00 | Rs. 91,051.00 | Rs. 1,40,274.00 |
What are you waiting for? Start investing early, Start investing today !! Do you know why?
It pays to save early for your child. The amount you save over a fixed period may grow to a larger sum if your child is younger. Conversely, if the child is older, the amount you may receive at the time of maturity could be lesser.
The following example illustrates:
- Sneha is 2 years old when her parents start saving Rs.5,000 per month, for 5 years. Total investment made by Sneha’s parents over 5 years: Rs. 3 Lakhs.
- Suhail is 12 years old when his father starts saving Rs 5,000 per month, for 5 years. Total investment made by Suhail’s father over 5 years: Rs. 3 Lakhs.
- None of the parents withdraw any money from their investment till Sneha and Suhail reach 17 years of age. Which means, Sneha’s money remained invested for 15 years, whereas Suhail’s money remained invested for 5 years only.
- WHO HAD MORE MONEY AT THE AGE OF 17, Sneha OR Suhail?
- Sneha’s Rs. 3 lakhs, invested for 15 years, grew to Rs. 39.8 lakhs*
Suhail’s Rs. 3 lakhs, invested for 5 years, grew to Rs. 8.9 lakhs* only. - In other words, a delay of 10 years on his parents part, has cost Suhail Rs.30.90 lakhs!
*Figures based on 15% p.a interest, compounded monthly.
The above mentioned illustrations would have given you an idea about the financial needs of your beloved children and what arrangements you have made for them today. The illustrations are based on assumptions that you will be educating your children in India. In case you have plans for educating them in US, Canada, UK or in UAE you may have to invest much more as the cost of education in these countries are at least 5 to 10 times more costlier than in India.
Tips for inculcating the SAVINGS habit amongst your children right from their younger age.
- Open a bank account in the name of your minor child with you (father and mother) as the guardian.
- Start saving at least Dhm.1/- per day, per child and you will see a minimum savings of Dhm.365/- over a period of 1 year (365 x 12.75 = Rs.4653.75).
- If you plan for a birthday bash for your child and if you spend around Dhm.500/- every year, you may allocate at least 50% of that amount towards your child’s investment (Dhm.250 x Rs.12.75 = Rs.3187.50).
- Once this become a habit, you as well as your child will start realising the importance of savings and investments and will automatically start limiting the unwarranted wasteful expenses.
- Make systematic monthly investments in an equity or balanced fund. For your easy understanding and comfort we are giving you a list of Rupee denominated investment plans Exclusively designed for children.
Investment Plans for children :
- UTI Mutual Fund’s – Children Career Plan
- HDFC Mutual Fund’s – Children Gift Fund {Savings Plan / Investment Plan}
- IDBI Principal Mutual Fund’s – (a) Child Benefit – Career Builder plan (b) Child Benefit – Future Guard Plan
- Franklin Templeton Mutual Fund’s – Children Asset Plan.
All these investment plans from these reputed Mutual Fund houses have one thing in common. They all aim at optimising returns on a balanced portfolio consisting of around 60% investments in debt and 40% in equities or equity related investments. This will generate a steady growth of capital and a lump sum amount or staggered payments can be received after a specific period of time as per the plans of the parents.
Some of salient features of these funds are tabulated below.
| Particulars | UTI – CCP | HDFC – CGF | Templeton CAP | IDBI Principal CB/FG Plan |
| Nature of Scheme | Equity & Debt | Equity & Debt | Equity & Debt | Equity & Debt |
| Minimum investment | Rs. 2000.00 | Rs. 500.00 | Rs. 2000.00 | (a) Rs. 5000/- one time and (b) Rs. 5000/- & recurring as per term of the plan |
| Entry load | Nil | 1% | Nil | 1.90% |
| Exit load | Nil | Nil | Nil | Nil |
| NAV calculation | Daily | Daily | Daily | Daily |
| Age limit | 0 to 15 years | 0 to 18 years | 0 to 15 years | |
| Maturity Age | 18 years of age of the child | 18 years of age of child or 3 years after investment which ever is later | 18 years of age of the child | |
| Draft should be made as | UTI MF – A/c CCP payable at Mumbai | HDFC Children Gift Fund payable at Mumbai | Templeton India Children Asset Plan payable at Chennai | IDBI Principal Child Benefit – Career Builder Plan / Future Guard Plan payable at Mumbai |
You can also make investments by drawing a cheque in favour of the Fund from your NRE/NRO bank account(s) maintained in India. If the investments are made out of the NRE account or vide draft purchased abroad, the principal as well as the gains accrued on the investments can be credited back to the child’s NRE bank account back in India or can be obtained vide a US $ draft in a foreign country. The income received from these investments are not clubbed to the income of the parents and tax implication, if any, is restricted to only Long Term CAPITAL GAINS TAX. Tax implications are subject to case to case basis and are also based on the relevant tax laws at the time of withdrawals made from the investments.
For more details and assistance for investment, please contact:
Mr. K V Shamsudheen, P.B No. 940, Sharjah,
Email : kvshams@barjeelsecurities.co.ae
Mobile: 00971506467801
Tel: 0097143555900