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Child’s education begins with a financial plan

In today’s day and age,brands targeting the youth in their campaigns is quite common.

Written by SumeetVaid |
June 14, 2011 2:14:07 am

In today’s day and age,brands targeting the youth in their campaigns is quite common. Even categories such as luxury cars and high-end products are now looking to talk directly to young consumers. It’s not surprising when one considers that we are a nation increasingly driven by youth.

Most parents would agree that the present scenario makes them apprehensive about the future prospects for their child,where along with the numerous opportunities the competition too has swelled. The rush to give your child the ‘best of everything’ leads parents to spend excessively on education — a tool they believe will help the child compete with his or her peers.

Quality education does not come cheap and lack of financial planning for a child’s future is a common mistake many parents commit. Though education loans are a preferred option today,wouldn’t it be better to create a fund that can provide for these expenses rather than taking a loan and paying interest on it?

It’s the golden rule of investing for any goal. One can never say enough about how this one simple act can go a long way in easing the financial strain that parents normally feel when their children are ready to pursue higher education. When creating a financial plan,there are three major decisions that you have to make – defining your goal in financial terms,deciding how much to save and the investment strategy to follow.

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Before you begin to create your financial goal,try to understand the kind of education that you want your child to have. And this includes both school and college expenses. For instance,do you want your child to pursue a medical degree or go abroad for an MBA course?

Once you have the education road map that you would like your child to follow,try to do some basic research on the cost of school and college education. You could call some of the schools that you are likely to consider and make an estimate of their tuition fees.

As a parent,one would want to play safe with money meant to support a child’s education. But that is where the challenge lies in executing the financial plan. If you do not take sufficient calculated risks,it might become difficult to grow the fund to a desired level. Take too many risks,and you could end up losing a major part of the fund during an unforeseen event like a stock market crash.

As a general practice,based on the time horizon that you are planning,opt for a mix of equity and debt funds. You could also consider investing in other types of asset classes.

The writer is founder and CEO of Ffreedom Financial Planners

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