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A child's education and his / her marriage are the top priorities for most parents when it comes to their financial goals. On both these fronts, there are several challenges.

For example, most parents do not know what their child would become 15-20 years from now. Even if some parents have dreams about their child's future profession, not every one can see those dreams materialize. So naturally, it also becomes quite difficult to have a fair idea about the future cost of higher education for their child.

It's slightly better on the marriage front. Once parents have a fair idea about how much they would like to spend on their child's wedding, with the rate of interest in mind, one can have some better approximation of the costs than they can have for their child's future cost of higher education.

Most financial planners, while putting in place a financial plan for their clients, ask them what their child would become, and most parents reply that they are not sure. So the next step is to ask them if they want their child to study in India or abroad. The cost approximation process starts after the parents answer this question, according to financial planners. The next few steps take into consideration if the child is set for an education in India. If yes, then what is the current cost? And based on the rate of inflation in the education sector, what could be the cost when the child is ready for such a course? Once the cost is estimated, the next step is usually to allocate a sum in one or more long-term equity fund(s) with a good track record. As the years pass, one needs to keep track of the portfolio — if the same is performing according to plan. If yes, then it should not be changed.

In case the portfolio is not doing well, then some changes should be made to bring it back on track towards the future financial goals, point out financial planners.

Closer to the time when the child is ready for his higher studies, I always suggest a shift to debt funds so that any chance of a slide in the equity portfol io is ruled out.

Some even invest in real estate. While there are advantages to that — at times the appreciation is so much that the total value far outgrows the amount required — there are disadvantages as well, financial planners point out. The top disadvantages being that a property is not divisible and also not highly liquid.

It may take some time to sell the property to realize its value, and if the timing of the final closure of the deal is beyond the time when the money is required, then there could be some hickups, they warn.

On the issue of marriage, in India, gold is one of the most important asset classes involved. So, financial planners advise that it's always better to invest in gold exchange traded funds
(ETFs) than in physical gold. That's because ETFs, at much lower costs than holding physical gold, take care of several disadvantages associated with physical gold — storage, selling at a discount, purity, etc.

Other than gold, since the plan to meet the expenses for the child's marriage should be in place years in advance, it's also advisable to invest in long-term equity funds to meet the future expenses. When such a plan is not put in place beforehand, often parents have to take loans to meet wedding expenses, and while paying back the loan they struggle to meet some other financial goals, including their retirement plans.

Such situations should never happen. Retirement should always be the priority. That's because, usually, the child's marriage takes place closer to the retirement of the parents. So it's always better to plan for wedding expenses keeping in mind how much one can meet comfortably.

For both these goals — child's education and marriage — taking an insurance product does not make much of a sense, financial planners say, mainly because the returns from an insurance policy hardly even meet the inl ation ra .

Keep insurance and investment separate. Don't invest in insurance for a child's future. The best thing for a parent to do in terms of insurance is to buy a term plan over the net.

Happy Investing!!

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