How to plan wisely for your daughter’s future

I am 36 years old and have a daughter who is 4. I am overwhelmed by the increasing cost of children's education and worried about my daughter’s future. I want to give the best to my daughter but I understand that the best things come at a cost. As a working parent, how can I prioritize and plan financially for my daughter’s future?

-Name withheld on request

With families getting nuclear day-by-day and skyrocketing education inflation, it becomes cardinal for young parents to plan and invest in their child’s education and future. If you plan to give your child a financially secure future, we need to start early and we need to take the right steps.

Firstly, when planning for your child’s education goal, consider her abilities and inclinations towards a specific subject and identify her future goals and begin preparation with adequate investments that match these goals. Include high costs like tuition fees for education, investment in technology like laptop, phones, higher education costs etc… Yes, future diversions and changes in goals are certainly a possibility. But some planning is better than no planning.

Once earmarking of investments and financial assets are done towards a child’s education and future, reckon monthly savings you need to do and start investing into a good mutual fund portfolio or stock portfolio with the guidance of a fiduciary advisor. It is easy to get swayed by short-term news and noise of market. But periodically remembering the purpose of investment becomes paramount and important to make compounding your friend to achieve this goal.

When you are nearing a child’s education goal or any other goal, around 3-4 years before, switch the asset allocation from equity-heavy portfolio to a moderate-risk portfolio. You would like to have capital protected rather than capital growth when the goal is nearing and the best way to do it is to park investment in fixed income instruments which has low risk.

During the complete course of setting realistic goals for your child’s education and future, financial planning for those goals, defining asset allocation and selection of products needs in-depth knowledge and requires a good chunk of time. So, it is advisable to seek assistance of a fiduciary advisor who can prepare a holistic plan for your child’s future considering risk appetite and tenure of goals.

At the end of the day, aspiring the best things for child is what parents crave for. And craving can become a reality with right planning.

(Query answered by Tarun Birani, founder and CEO TBNG Capital Advisors) 

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