Today, financial planning is not limited to having enough savings for the future. A good plan is one that allows you to accomplish various long-term and short-term goals, such as building a retirement corpus and meeting your child’s education. Achieving both can be tough if you don’t have the right strategy or don’t know how to balance them.
Over the years, the education cost has increased significantly. Getting admission into a reputed financial institution/university in India or abroad would incur significant fees. And you cannot ignore this vital expense as it would affect your child’s career and future prospects. At the same time, you cannot overlook retirement planning either.
Many people tend to sacrifice their retirement corpus for their child’s education. However, by doing so, you may put your financial independence at risk during old age. And considering the rising cost of living and medical expenses, you must have decent savings to see through the second innings of your life.
How to plan your retirement?
The most important step towards retirement planning is starting early. The sooner you begin, the better your chances of creating a more extensive corpus. Generally, investment experts advise investing in a retirement scheme or an annuity plan as soon as you draw your first salary.
You cannot build a large corpus overnight; it requires patience, financial discipline and the right strategy. You must invest in the right plan so that you can allow your money to grow over time and get compounding returns.
For example, if you start investing ₹5000 a month in a financial instrument like a pension plan from the age of 30, you may build a corpus of up to ₹50 lakh by the time you reach your retirement age. Every year of delay would reduce the size of your corpus.
How to plan your child’s education?
One of the best ways to manage your finances for your child’s future education expenses without compromising on your other goals is to create a separate and dedicated portfolio. You can start investing in instruments like ULIP (unit-linked insurance plans). This will help you get additional insurance cover and an opportunity to create a corpus for your long-term goals like your child’s education fees.
When you pay the premium for ULIP, a part of your premium is used for insurance coverage, and the remaining amount is invested in different money market instruments, like debt funds, equity funds, government bonds, balanced funds, etc.
ULIPs allow you to get valuable returns over time and give you the flexibility to choose the investment exposure. You can readjust your investments in different schemes based on your goals, expected returns, and risk-taking capacity. Not to mention, you can avail of tax benefits every year on the premium paid. The key to making the most out of your ULIP investment is to start early.
Final Word
Retirement planning and child education are both vital financial goals. You should start investing in a child plan soon after their birth. Over the years, as your income grows, you can increase your investment in retirement plans or diversify your investments in multiple instruments to give yourself the best chance of building a decent retirement corpus.
