Parents strive to provide the best of everything to their children. Early and systematic planning for your child's future will help you get ready for various stages of life. This ideal plan would cover all the important aspects of your child’s life including childhood, highereducation, health care and even marriage.
Parents encounter several challenges while making plans for their children. Most parentsare unsure of how to begin, what specifically to save for, how much money to invest or where to deposit their money.
Parents now need to plan their funds for their children because of the recent increase in the expense of schooling, rising standards, lifestyle changes and other similar aspects. Education has become an expensive affair and it is important to plan wisely for your child’s future.
Also, there are a lot of factors to think about while setting a budgetfor your child's expenses. For instance, the choice of investment vehicle has a significant impact on the asset's growth and ability to outperform inflation.
Why is it important to plan for a Child’s Financial Future?
Planning your child’s financial future requires thorough planning and solid investment plans so that the investments can stand the test of growing inflation. If you want to ensure that your child has a bright financial future, you must start early and follow the appropriate action plan.
Firstly, when preparing for your child's educational objectives, think about their aptitudes and interest in a particular subject, determine their future ambitions (for example- they’d wish to study at a college abroad) and accordingly start putting your money to work. Parents must try and understand the long-term and short-term goals of their child. The short-term goals might include – tuition fees, extra-curricular activities fees etc. and long-term goals might include higher education, marriage, university fees etc.
Furthermore, it is important to include significant expenses like technological purchases like laptops and phones, rising education prices etc. Yes, there is a chance that future detours and aim adjustments will occur; however, even a little bit of forethought is preferable to none.
Importance of Investing in Stocks
The typical interest rate for conventional savings instruments, such as bank deposits and endowment insurance, is between 5% and 7%. Additionally, because interest on bank deposits is completely taxable according to the investor's income tax bracket, the returns on these instruments after taxes and inflation are almost negligible.
Making prudent plans for your child's future needs is more crucial than ever as inflation rises and return rates on traditional assets stay low. Thus, the importance of investing in stocks cannot be denied, owing to their great potential to grow. A diversified portfolio of stocks has the potential to generate long-term returns and thereby beat inflationary pressures.
Some of the major reasons to consider investing in stocks are listed below -
- It is obvious that investing for your children’s future is a long-term goal. You want to pay their education fees, transport charges and even buy them a house.
- Thus, only if you start planning now, you will be able to attain returns in the long run and it is a well-known fact that investing in stocks helps in generating wealth if one stays invested for a long time.
- The power of compounding works wonders when one stays invested for years and this ultimately leads to wealth creation.
- Another important point to note is that one must pick stocks wisely by studying their past performance, history of management and promoters, a 52-week high, 52-week low and other important aspects. In this way, when one invests in the best stocks and companies, returns are bound to be generated.
- Over the long term, stocks have one of the highest potential for growth (capital appreciation) for investors. Those who have chosen to hold onto stocks for an extended length of time—say 15 years—have typically been rewarded with robust and profitable returns.
- Your regular income is mostly used for household expenses, maintenance and other living expenses. However, when you invest in stocks, you are creating a passive income source for yourself and your future generation. The money earned through capital appreciation, bonus shares, right shares and dividends will take care of the future expenses of your children.
Conclusion
If you are considering financial planning for your children, investment in stocks must surely be on your list. A valuable component of your financial portfolio should be stocks. You may increase your savings, shield your funds from inflation and taxes and increase the return on your assets by purchasing stocks in various companies.
Parents can invest in equity-related instruments that are long-term in nature to meet their liabilities and funding requirements to generate wealth over the long run and secure the financial future of their children.
So, if you foresee a bright and financially secure future for your children, start investing in stocks today!
We understand that it can be a little overwhelming to decide which instruments to choose, how much money to save, how to do budgeting and how much funds will your children need in the future. Keep your worries at bay and connect with mastertrust today to learn about stock market investments and financial planning in detail.