Planning for your child's future is no child's play. It calls for considerable investment of time and effort to work out the details. November 14, the Children's Day, may not hold much significance otherwise, but it doesn't hurt to treat this date as a constant reminder of what needs to be done to achieve the financial goals you have in mind for your child.
Remember, you have to go through the entire process of financial planning - right from identifying the goal to deciding on the asset allocation plan; reviewing the performance, recasting the portfolio and so on - just as you would do for your retirement planning.
THE RIGHT TIME TO START
While drawing up an investment plan, it is best to map out the corpus a child will require in each stage of his/her life. Also, don't forget to include pre-school costs and extra-curricular activities in the plan.
Over the years, the average age at which a child starts attending school (pre-schools) has come down to two years. Now, pre-schools cost anywhere from Rs 2,000 and Rs 6,000 a month on an average. Once a child turns five, the parents have to choose between SSC (state secondary certificate) that can cost anywhere between Rs 24,000 and Rs 40,000 a year, Indian Certificate of Secondary Education (upwards of Rs 30,000 a year) or International Baccalaureate schools (over Rs 1 lakh a year), Besides, nowadays, the trend is to enrol preschoolers for interview training classes (costing Rs 10,000 – Rs 20,000) too.
Then, of course, there are music and drama classes and vacation camps to be paid for. Another factor to be borne in mind while calculating future costs is the inflation in the education sector. "In upmarket IB schools, the year-on-year inflation has been 15% per annum on an average. So, education inflation of 8-9% can be added to ones calculation," she says. Again, while budgeting for cost of extra-curricular activities, you need to identify say a sport that your child may be inclined towards.
Next, you can try to do some research on the cost of training it may entail. Sometimes, parents assume that it is beyond their means to provide for a particular aspiration of the child. But penning down the costs and actually reviewing your surpluses and existing resources - investments and savings - can throw up surprising results,