Whether you’re putting money away for college or a rainy day, here’s a guide to making sure it grows.
When Tejal, 28, and her husband, Gaurav Mehta, 29, found out they were expecting their first child in March, they quickly began wondering how, and if, they should start saving for future college costs. "Both of our parents were able to pay for our undergrad education, so we probably want to do a PPF & NSC," says Tejal, adding that they also want to put money away for general expenses, such as future education and weddings.
Until recently, the couple, who lives outside of Mumbai, had saved for two purposes: retirement and a house down payment. Tejal, a Primary School Teacher, and Gaurav, an engineer, put most of those savings into the Fixed Deposit's, where it's taken a beating of Inflation. That leaves them wondering if they should put their child-related savings into safer spots, which might not pay much of a return or consider risky assets.
"I don't want to risk too much up and down," says Tejal.
So what should new parents like Tejal and Gaurav do with their savings?
It turns out that there are some new strategies that work better than the traditional methods of saving.
The old methods include opening a Minor's PPF account, It is one of the favorite investment options of a lot of experts. The primary reason for recommending this is the impeccable EEE feature. Moreover, the tenure or maturity period of this product i.e. 15 years is so very apt in terms of investment for child’s education but while selecting such option primary intention is security to capital and interest. This Accounts automatically transfers into the child's name when he or she becomes an adult (18 Years).
The downside is that because the money automatically transfers, parents have no control over the funds after the child reaches that age, which means the child could spend it on anything. Similarly, buying a NSC from the Postal Department, which was once a favorite way of putting money aside for newborns, carries such a low interest rate today that there is little chance of keeping up with inflation, especially over the long-term. Fixed deposit present the same problem.
Here are few new, smart ways to save instead:
1. Risk cover to protect future goals: You should take proper term insurance cover for yourself to secure your child against any unforeseen event. Though these things do happen, but the probability or chances of happening such events would be low or cannot be quantified. “It is advisable to have a risk cover in order to reduce or avoid the financial impact on the lives of your dependent in cased of happening of unforeseen events. Thus one should make sure that the future costs related to your child’s requirement are adequately covered in this insurance. Three important expenses to be noted while going for a cover 1) Education 2)Marriage 3) living expenses till they become adult.”
2. Mutual Funds Child's Funds: According to my personal survey, 67 percent of adults have never heard of such plan, even though financial advisors agree that it's the smartest way to save for college Education and child's marriage . The funds, which are allow parents to invest money that then grows tax-free and remains tax-free as per current Law.
"Depending on the age [of your child], you will be more aggressive, and then become more conservative as your child gets older,". you can select funds SIP (Systematic Investment Plan) and auto top up option.
For parents who do not wish to create an exclusive portfolio for their children, fund houses have an alternative in terms of children’s plans which are balanced Funds(hybrid Plans). They have been designed in such a way that parents can decide on the different options depending on their investment horizon.
3. Equity Mutual Funds: This ranks right up there in terms of priority. There are two reasons for this – longer time frame (10-15 years) and the mode of investment available (SIP)., a monthly SIP of Rs 10,000 in equity mutual funds for 18 years can fetch you Rs 66 lakh, assuming a return of 12 per cent per annum. Even considering an inflation of 6 per annum, this amount would more than suffice. However, the key here is not the amount invested but the time given. Power of compounding has always been understated. Equity funds have a history of generating 12-15 per cent per annum returns. And SIP, of course, is considered to be one of the best ways to average your cost over the long term.
For a time span of ten years or longer, "Put it in a moderate aggressive investment. Over a ten-year period, you can be more aggressive." The money can then be used for college, living expenses, a wedding, or anything else.
4. A dedicated child's savings account: In today's market, savings accounts carry relatively low interest rates, but they come with other advantages, including the opportunity to teach children about money and savings as they get older. This savings account, in the child's name or the parent's name, can supplement the other, more aggressive investing strategies above. Some banks, offer teaching materials along with kids' savings accounts, and waive fees for low balances as well as requirements for minimum account balances.
"Banks were charging exorbitant fees for parents for zero balance savings account so we created the kids' savings account," this also helps children learn about money as they start to save and invest.
5. Invest in Gold (Long Term): Gold acts as a hedge against equity or equity mutual funds and during volatile times. Gold ensures your risks in the financial markets are hedged. “Investments in gold should be either through ETF, gold mutual funds or E Gold. It is advisable to avoid physical investments in gold in order to reduce the risk of storage and the cost associated with the physical holding. Also the prices of the paper gold is derived based on the current gold prices in the market and hence it is as similar to buying or investing in a Gold fund.”
I think, “Without gold, a portfolio is never complete for an Indian consumer. It has always been the favorite investment option. Events like marriage can be called as mini festivals of gold. If gold is such an unavoidable metal, why not start saving for it right away! I believe the best way to do it is through Gold ETFs and Gold Funds. However, make sure this investment does not exceed 10-15 per cent of your overall portfolio or only as much as you would need for the goal.”
It is high time that you make provision for your children’s education and start investing for the same. From the mutual fund industry you can consider either of the two options mentioned above.
Tejal and Gaurav Mehta say they will probably start with the Mutual Funds Child's Funds with SIP and expand their savings from there. Meanwhile, they are trying to figure out how to find savings in their budget, even after their baby arrives. Says Tejal: "We started talking about cutting back on vacations, traveling, and going out … Then we can have more money for the baby's needs now."
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Until recently, the couple, who lives outside of Mumbai, had saved for two purposes: retirement and a house down payment. Tejal, a Primary School Teacher, and Gaurav, an engineer, put most of those savings into the Fixed Deposit's, where it's taken a beating of Inflation. That leaves them wondering if they should put their child-related savings into safer spots, which might not pay much of a return or consider risky assets.
"I don't want to risk too much up and down," says Tejal.
So what should new parents like Tejal and Gaurav do with their savings?
It turns out that there are some new strategies that work better than the traditional methods of saving.
The old methods include opening a Minor's PPF account, It is one of the favorite investment options of a lot of experts. The primary reason for recommending this is the impeccable EEE feature. Moreover, the tenure or maturity period of this product i.e. 15 years is so very apt in terms of investment for child’s education but while selecting such option primary intention is security to capital and interest. This Accounts automatically transfers into the child's name when he or she becomes an adult (18 Years).
The downside is that because the money automatically transfers, parents have no control over the funds after the child reaches that age, which means the child could spend it on anything. Similarly, buying a NSC from the Postal Department, which was once a favorite way of putting money aside for newborns, carries such a low interest rate today that there is little chance of keeping up with inflation, especially over the long-term. Fixed deposit present the same problem.
Here are few new, smart ways to save instead:
1. Risk cover to protect future goals: You should take proper term insurance cover for yourself to secure your child against any unforeseen event. Though these things do happen, but the probability or chances of happening such events would be low or cannot be quantified. “It is advisable to have a risk cover in order to reduce or avoid the financial impact on the lives of your dependent in cased of happening of unforeseen events. Thus one should make sure that the future costs related to your child’s requirement are adequately covered in this insurance. Three important expenses to be noted while going for a cover 1) Education 2)Marriage 3) living expenses till they become adult.”
2. Mutual Funds Child's Funds: According to my personal survey, 67 percent of adults have never heard of such plan, even though financial advisors agree that it's the smartest way to save for college Education and child's marriage . The funds, which are allow parents to invest money that then grows tax-free and remains tax-free as per current Law.
"Depending on the age [of your child], you will be more aggressive, and then become more conservative as your child gets older,". you can select funds SIP (Systematic Investment Plan) and auto top up option.
For parents who do not wish to create an exclusive portfolio for their children, fund houses have an alternative in terms of children’s plans which are balanced Funds(hybrid Plans). They have been designed in such a way that parents can decide on the different options depending on their investment horizon.
3. Equity Mutual Funds: This ranks right up there in terms of priority. There are two reasons for this – longer time frame (10-15 years) and the mode of investment available (SIP)., a monthly SIP of Rs 10,000 in equity mutual funds for 18 years can fetch you Rs 66 lakh, assuming a return of 12 per cent per annum. Even considering an inflation of 6 per annum, this amount would more than suffice. However, the key here is not the amount invested but the time given. Power of compounding has always been understated. Equity funds have a history of generating 12-15 per cent per annum returns. And SIP, of course, is considered to be one of the best ways to average your cost over the long term.
For a time span of ten years or longer, "Put it in a moderate aggressive investment. Over a ten-year period, you can be more aggressive." The money can then be used for college, living expenses, a wedding, or anything else.
4. A dedicated child's savings account: In today's market, savings accounts carry relatively low interest rates, but they come with other advantages, including the opportunity to teach children about money and savings as they get older. This savings account, in the child's name or the parent's name, can supplement the other, more aggressive investing strategies above. Some banks, offer teaching materials along with kids' savings accounts, and waive fees for low balances as well as requirements for minimum account balances.
"Banks were charging exorbitant fees for parents for zero balance savings account so we created the kids' savings account," this also helps children learn about money as they start to save and invest.
5. Invest in Gold (Long Term): Gold acts as a hedge against equity or equity mutual funds and during volatile times. Gold ensures your risks in the financial markets are hedged. “Investments in gold should be either through ETF, gold mutual funds or E Gold. It is advisable to avoid physical investments in gold in order to reduce the risk of storage and the cost associated with the physical holding. Also the prices of the paper gold is derived based on the current gold prices in the market and hence it is as similar to buying or investing in a Gold fund.”
I think, “Without gold, a portfolio is never complete for an Indian consumer. It has always been the favorite investment option. Events like marriage can be called as mini festivals of gold. If gold is such an unavoidable metal, why not start saving for it right away! I believe the best way to do it is through Gold ETFs and Gold Funds. However, make sure this investment does not exceed 10-15 per cent of your overall portfolio or only as much as you would need for the goal.”
It is high time that you make provision for your children’s education and start investing for the same. From the mutual fund industry you can consider either of the two options mentioned above.
Tejal and Gaurav Mehta say they will probably start with the Mutual Funds Child's Funds with SIP and expand their savings from there. Meanwhile, they are trying to figure out how to find savings in their budget, even after their baby arrives. Says Tejal: "We started talking about cutting back on vacations, traveling, and going out … Then we can have more money for the baby's needs now."
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Allaudin Bldg Shop No 1,Manchubhai Road,Malad East,Mumbai - 400097.
Shop No.9,Param Ratan Bldg,Jakaria Road,Malad West,Mumbai - 400064.
Tel:28891775/28816101/28828756/28823279. CELL:9930444099 www.tejasconsultancy.co.in | E-mail Us: ritesh@tejasconsultancy.co.in
Disclaimer:
This POST is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only and is not spam. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this emailer.The views are personal. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing.
To unsubscribe from future mailer Please e-mail: info@tejasconsultancy..co.in
Allaudin Bldg Shop No 1,Manchubhai Road,Malad East,Mumbai - 400097.
Shop No.9,Param Ratan Bldg,Jakaria Road,Malad West,Mumbai - 400064.
Tel:28891775/28816101/28828756/28823279. CELL:9930444099 www.tejasconsultancy.co.in | E-mail Us: ritesh@tejasconsultancy.co.in
Tel:28891775/28816101/28828756/28823279. CELL:9930444099 www.tejasconsultancy.co.in | E-mail Us: ritesh@tejasconsultancy.co.in
Disclaimer:
This POST is addressed to and intended for the investors of Ritesh Sheth & Tejas Consultancy only and is not spam. You are advised to contact Ritesh Sheth & Tejas Consultancy to clarify any issue that you may have with regards to any information contained in this emailer.The views are personal. Ritesh Sheth & Family or Tejas Consultancy does not guarantee the accuracy, adequacy or completeness of any information in this emailer and is not responsible for any errors or omissions or for results obtained from the use of such information. Ritesh Sheth & Family or Tejas Consultancy does not have any liability to any person on account of the use of information provided herein and the said information is provided on a best effort basis. In case of investments in any of our schemes, please read the offer documents carefully before investing.
To unsubscribe from future mailer Please e-mail: info@tejasconsultancy..co.in
To unsubscribe from future mailer Please e-mail: info@tejasconsultancy..co.in
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