How To Plan For Your Child’s Future With Saving Plans?

People usually save either for retirement or with a specific goal in mind. One of the goals is children’s future like education or marriage, while other goals could be to buy a house, car amongst others. This article focuses on the children’s future as a goal.

There are 3 key variables that you broadly need to keep in mind when planning for children:

·         The amount you may need for the child’s education (and marriage)

·         Years left to the event

·         Return expectation to build in

So our first advice to you is to start early. If you start investing for a child when you marry, you may have as many as 20 years ahead of you. But if you start when the child is say 5 or 8 years old, then you could be left with barely 10-12 years. The more the years you have, the less you need to set aside on a monthly basis.

The other critical part is the return your savings are generating. It is common to find parents investing in fixed deposits or Public Provident fund(PPF) to sponsor their children’s education or marriage. While as an investment option it is safer, it also generates paltry returns of 8-9% per annum. While interest on PPF is tax-free, that on fixed deposit is taxable, which pulls down the post-tax returns even further. Given the rate at which cost of higher education is shooting up in the country, debt definitely seems an investment option not worth considering.

As against this, if you try to aim for equity investments, your returns could be between 12-14% per annum, which is the bare minimum returns equity markets show over long periods. Given the long term horizon, short term market swings are unlikely to affect your final return, and chances of making true equity returns are higher. As your approach the last 2-3 years of the child’s educational needs, you can choose to shift the portfolio towards debt, to eliminate any volatility risk – though this would not be a major consideration as the requirement for funds would be spread over a 3-4 year period.

Why Rs 75 Lakhs?

Rs 75 lakhs may sound like a large number, but remember that with normal inflation, costs double every decade. In addition, inflation in education related expense is expected to be higher than average inflation and therefore even the Rs 75 lakhs, in about 20 year time, is not a large number.

How can you go about your investing in Equity for this purpose?

Many parents prefer to open an investing account in the name of the child, in order to isolate the account, accommodate for gifts in the name of the child, and for tax reasons. If you plan to save in the name of the child, note that you cannot open a demat account in the name of a minor, and therefore the route to equities will have to be through a Mutual Fund.

Investing independently into equity funds over such long horizon requires keeping track of performance and weeding out of underperforming schemes. If you are not up to regular monitoring of funds, then you need to seek help of financial advisors, who will do it for you, but you need to trust their subjective judgment.

At Scripbox, we help in this process in 2 ways. Firstly, the selection of equity Saving Plans will ensure you own the most consistently performing Mutual Fund through the entire period. In addition, you can open your child’s account as an add-on account.

[ Source : http://savingplans.blog.com/2016/06/10/how-to-plan-for-your-child%E2%80%99s-future-with-saving-plans/ ]

Savings & Investment Planning for Children’s Higher Education

Becoming parents is a turning point in our lives. As their guardians, it is our duty to plan for their future and invest wisely so that they receive the best possible facilities that in turn will materialise as better opportunities in a competitive world. Such a goal requires early and intricate planning, dedicated devotion to the goal and taking calculated risks sometimes to generate good returns.

Children’s secure future mostly depends on a strong education which becomes a foundation to find new avenues in the future and be successful. The ever increasing education cost and tuition fees have put a shadow of uncertainty on the future of your child. Here we look at some of the options of investment that can ensure their happiness and provide them with possibilities for a sound education in future.

Insure Yourself

Yes, insure yourself! Savings will only last for some period and may get exhausted during unavoidable circumstances, but an insurance policy of a parent is the second roof for his dependent. Such a scheme would help your child with his educational needs that would otherwise be hard to cover in the absence of insurance. Some child plans also offer a fixed amount once the child attains the age for higher education which takes care of his higher education costs.

Invest in long-term saving schemes

Investing in long term fixed deposits, SIP mutual funds, Unit Linked Insurance Plans (ULIP),NSC etc. when your child is a toddler helps to make sustainable amounts for your child long term future plans. If you have some near future targets for your child like enrolling him/her in vocational streams of study along with a regular education then recurring deposits helps to fund these. PPF is another scheme that will help for your child’s future as it locks the amount invested for 15 years giving a good sum at maturity along with interest. PPF offers a compounded interest and hence is a very good savings option.

Devise a strategy

Plan for a projected amount that your child would require at various stages of his school and college life; chart an investment strategy and review it with the changing market conditions. Try to reduce risk by taking away investments from high-risk products to a safer option when your long term investment plans are at the brink of maturity. This would prevent the incidence of loss in case some risky investments are prone to loss in a volatile market.

Common Sense

Making your children aware about the expenses and limiting unnecessary frivolities would help them inculcate saving habits from a young age. Effectively teaching them the difference between a want and a need would make them responsible towards their future and  self-reliant.

Tax Savings

Taxpayers can also save taxes under section 80C and 80E against their investments and children’s education expenses. Section 80C offers a deduction of up to 1.5 Lakhs spent on children’s tuition fees. Section 80E also provides education of interest on loan taken for higher education of the child. Parents can invest in Sukanya Samriddhi – a government initiative to promote and improve education for a girl child which is again a part of 80C family of deductions. The return of this investment has a 9.1% rate of interest giving ample opportunity for education to the girl child.

A well-planned approach towards Saving Plans can help a lot in making sound financial arrangements for your children’s education. If you invest wisely in both short term and long term investments and spread the risk, a major chunk of the heavy education costs can be taken care of. After all, creating a bright future for kids is our greatest responsibility.

Best Savings Insurance Plans

We might have a sufficient income to live our life comfortably but to ensure that we lead an equally hassle-free life we need to save our income judicially. With changing time, our needs also increase. Constantly increasing inflation, expenses of our growing children, probable illness of old age along with various situations which might occur in future; it becomes even more important to save a definite amount of our income.

For a secure and a comfortable life, it is crucial to have a saving insurance plan. Saving Plans come in various kinds, offering consumers the freedom to choose a plan which suits them the most.

Primary Types of Saving Insurance Plans:

Depending on factors such as financial risks, inflationary factors, varying financial instruments, available time for tracking your investment, you can select either a traditional or a ULIPs plan.

Traditional Endowment Plans: These are the regular saving plans, which offer bonuses to investors. These are considered to be one of the safest plans. These plans help in building a corpus and also ensure maturity benefits. Here you get the equivalent returns for your deposit along with risk cover and add-on riders, assisting you in emergency such as in case of an unanticipated situation.

Unit Linked Insurance Plans (ULIPs): One of the best long term investment plans, ULIPs offer investors an opportunity to benefit the market linked returns as well as enjoy an added life cover. It is one of the easiest ways for a consumer to enter the stock market, at the same time avail tax benefits which are offered with these products. While choosing ULIPs, consider transparency and the flexibility, depending on the risk profile.

Investors can also choose from following two types of plans:

Money-back Plans: An endowment plan, money-back plans are most effective if you are keen on building large sum of funds at regular intervals. These come handy for those who would like to save for certain purposes at various point of time in their life, for instance for buying various assets. It provides investors with periodic funds payout.

Child Plans: Child Plans are suitable when parents intend to build a monetary protection for their children. These plans help investors to fulfill their child’s future needs such as education and wedding, by providing them with an opportunity to create an asset for their child.

Why a Saving Insurance Plan?

Savings Plans presents a reliable tool for increasing your funds and in turn offering a life cover to its consumers. Below are a few reasons to why one should opt for a Saving Insurance plan:

·         It is one of most secured and systematic way of increasing your assets and in turn fulfilling your life dreams.

·         It safe-guard your investments as well as take care of the changing markets conditions.

·         You get better returns for your savings

·         Assist you in the times of needs. You can cater to all your requirements with the maturity amount you receive.

·         Flexibility of the plan allows you to choose an investment period as per your choice; allowing you to fulfill

·         Your specific requirements at the right time.

·         Best Savings Plan usually has the minimum charges and thus offer you maximum benefits as well as flexibility for cash withdrawal.

How to choose a savings plan:

·         Consider all your financial goals and then choose the plan; decided whether you want a long term or short term plan.

·         Carefully evaluate and keep a balance between risks factors and the returns you will receive; distribute amount properly between the two.

·         Choose a plan which provides you a cover as long as you want and also provides you with enough bonuses and other added benefits.

·         Learn about the various characteristics of the plans before selecting one. For instance, decided whether you want partial withdrawal without letting off the entire policy or want to take the amount only at the time of maturity with all the bonuses and benefits and then opt for one suiting you.

Best time to choose:

There is no particular time to opt for a saving plan. However, it is better to start as early as you can, which ensure a bigger amount of returns. It is also advisable to motivate kids to start saving.

Things to be careful of:

·         Avoid burdening your present financial situation by over investing. Carefully assess your monetary requirements, based on which select the investment amount. Sometimes, investing more than you can comfortably afford can lead to cancellations which in return lead to penalties.

·         Decide the investment tenure, whether you want a mid-term or a long term investment. Evaluate all the probable factors. While finalizing on a plan do keep in mind the inflationary factors so as to get your expected returns.

Best Savings Plan

Top Tax Saving plans Strategies

Paying taxes is relatable to every earning person. Being a necessary evil, taxes are what help run the economy, much as you’d like to evade them completely. However, the government was kind enough to offer a variety of tax saving strategies as a concession. According to section 80C of the Income Tax Act, a sum total of 1.5 lakh rupees may be invested in all these put together so that the same amount may be deducted from your taxable income. We all know that the simplest way to avoid excess tax payments is to pay on time to avoid interest building up on it. For this purpose, there are tax saving strategies which include the following methods:

•             Your best bet is to invest in a public provident fund (PPF) as it guarantees 8.7% tax free compound interest per annum. With a maturity period of 15 years which can be extended to 25, this is a viable source of retirement funds. You could also choose superannuation funds as a pension plan.

•             Investing in tax-free bonds, NSCs (National savings certificates) and ELSS (Equity Linked Savings Schemes) are all profitable from the point of tax savings.

•             Get tax deductions on life insurance policy of any one of your immediate family members. However, only if premium is less than 10% of the assured sum for all the years will you be able to avail this benefit.

•             If you are physically or otherwise disabled, you are liable to receive a tax deduction of up to INR 50,000 on your taxable income. If you are suffering from two different disabilities, you are eligible to receive a tax deduction worth INR 1,00,000 provided you have sufficient proof.

•             Save money while creating assets such as a house. You can save money on a second home if you rent it out. This is because you can avail a deduction for interest on the loan.

•             Involve your family members in a business you run in order to reduce your own taxable income. This puts you in a lower income category while also providing you the tax deduction benefits of your family members. Hence, the total tax paid by your family will be reduced.

•             Choose Saving Plans that do not cause clubbing of your children’s income with yours or gift an education loan to your children to reduce taxes incurred.

How to save enough for family’s secured financial life?

Life is a beautiful picture until you come across the tornado of emergencies, which can shatter your happy life if you don’t have enough savings in hand. Every person faces some or the other emergency at some point of time in life. These emergencies can be tackled by building sufficient corpus over the years under a dedicated effort known as “savings plan.” Saving is a good idea. Every person sets certain financial goals such as long or short term. Depending upon their needs, income source and future projections everyone can work upon saving plans for balanced life. You don't need a big income to save for the things you want in life.

The article gives few tips on working upon your best saving plans to produce healthy corpus to lead financially secured life.

Goal Identification

Make a list of all the things you want to save for. It could be a new house, car, child education, retirement fund anything under the sun. Start off with all your dreams and narrow them down with the priority ones. Remember the more savings goals you have, the more a comprehensive savings plan will help you stay on track to pursue them.

Cost Determination

Next would be figuring out the costs to fulfill your financial goals. These could be loans or one time payments including all the costs such as foreign trips, hospitalization, buying a car or a house, etc. Once you come to consensus on cost involved use saving plans calculators to decide your premium costs.

Target Date

Once you determine the costs and financial goals next would be to assume the time needed to fulfill your wishes. For short term goals which are year or two away, consider keeping your savings in a low-risk savings account that protects your money. For longer-term goals, you may consider investments such as stocks or mutual funds, since a longer period can give you timeframe to recover from stock market fluctuations. When you get closer to your goals it would be good idea to transfer more of your investments to lower-risk savings products.

Calculations

Once you determine these factors divide the total cost of each of your goals by the number of months you want to wait and add them up to see how much you need to save every month. If you want you can use saving plans worksheet to help figure out your monthly savings target.

Adjustments

Best saving plans need a lot of market knowledge, permutations and combinations, and adjustments accordingly to market movements. Compare the monthly target from your savings spreadsheet to your current rate of savings. If you're not saving enough you can increase savings by cutting monthly expenses. Alternatively, adjust your goals, either by removing less important ones or by postponing the goals in future. Savings spreadsheet makes it easy to revise your savings goals until you make necessary financial arrangements.

See Savings grow

Keep a tab on money invested in funds every quarterly. Not only will this help you stick to your personal savings plan, but will also help you identify and fix problems quickly. Besides, seeing your money grow generally boosts your confidence and you tend to take a decisive approach to build best saving plans and hit goals faster. When you have set up your long term savings plan, you'll be building up a good reliable cushion that can add up to future financial security.

Best Tax Saving Plan

Best Tax Saving Plan