FINANCIAL PLANNING FOR REGULAR
EDUCATION EXPENSES
· The regular
annual requirement of funds for a child’s primary and secondary education is
more an issue of budgeting, and less of financial planning.
· Yet, there are
some investment tools available in the market which can help parents meet this
goal too.
· One of the
options is to go for a short-term systematic investment plan (SIP) in a debt
fund.
· Here, the main
aim is to minimize portfolio risks and preserve the funds to meet needs that
would almost certainly arise within a year.
· To minimize
portfolio risks in debt funds too, you should choose a fund in which the
maturity of its investments (bonds, etc.) matches the time when you require the
fund.
· As a thumb rule,
if you need your funds in about 11 months from now, you should look for debt
schemes which have bonds, etc. in its portfolio which will also mature in 11
months.
· By deciding on
this strategy, you would be able to further minimize your portfolio risks.
· In case you
receive a windfall, like a lump sum in the form of a bonus, and you don’t need
the fund immediately, invest it in a fixed maturity plan (FMP).
· Since FMPs are
relatively illiquid and you can get your money back at the time of maturity,
you should choose one where the maturity of the fund matches with the time, say
after six months, when you need your funds for your child’s education.
· In case you have
some additional annual expenses for your child’s education, you can add the
same to the school fees and work out the best short-term financial plan to meet
the total fund requirement.
· Remember that
investing in pure equity instruments for such short periods of time could be a
highly risky proposition.