Planning for Children’s Goals: A Step Towards Securing Their Future

Becoming a parent is one of the most profound milestones in life. With the arrival of a child, our priorities and goals begin to shift, often centering around ensuring the best for them. From top-notch schooling and higher education that lays the foundation for a thriving career to a wedding where they embark on their own journey, every parent aspires to provide the best opportunities for their children.

In today’s world, competition begins early—whether it’s securing admission to a reputed school or pursuing a prestigious degree. These aspirations can be overwhelming, and the thought of funding them might create anxiety. However, financial planning for these milestones can significantly alleviate this stress and pave the way for your child’s bright future.

Imagine your child taking their first steps or murmuring their first syllables like “Ma” or “Pa” At this joyful stage, it’s also the perfect time for you to start building a financial chest to meet their future milestones. Planning early allows you to harness the power of compounding, which works wonders over time.

Think of it this way: a student who studies consistently throughout the year is better prepared for exams, even if unexpected challenges arise. Similarly, when you start saving early, your financial foundation becomes resilient. It can withstand setbacks, such as emergencies or a layoff, without jeopardizing your ultimate goals.

Let’s break this process into a simple, actionable framework using the example of funding your child’s graduation degree. You can apply the same steps to other milestones like schooling, post-graduation, or a wedding.

1. Estimate the Current Cost

Begin by researching the approximate cost of a graduation degree today. For instance, if an engineering degree costs ₹10 lakh today, this becomes your starting point.

2. Factor in Inflation

Education costs tend to rise faster than general inflation. Assume an annual inflation rate (e.g., 6-8%) to project how much the same degree will cost when your child reaches college age. Using our example, if your child is currently a year old, and they will need this amount in 17 years, the cost will likely be significantly higher.

3. Calculate Monthly Savings

Use the PMT formula to calculate how much you need to save monthly. This formula takes into account the future value (inflated cost), the expected rate of return on investments, and the time horizon.

For instance, if the projected cost in 17 years is ₹20 lakh, and you expect a 12% annual return on investments, the PMT formula will help you determine the monthly savings required to reach this goal.

4. Visualizing the Plan

To make this process clearer, we’ve created a sample calculation in an Excel sheet. Below is an example table that illustrates how to calculate the future value of today’s costs and the corresponding monthly savings required for different goals:

This table shows the connection between today’s cost, future value (adjusted for inflation), and monthly savings based on investment returns. It serves as a clear visual guide to help you approach financial planning effectively.

5. Build a Margin of Safety

While estimating returns, err on the side of caution. If you anticipate a 15% return, consider using a slightly lower rate, such as 12%, to account for market uncertainties. This creates a buffer and ensures you stay on track even if returns fall short.

The earlier you start, the more time compounding has to work its magic. With a longer horizon, your monthly contributions can be smaller, yet the accumulated corpus will be larger. Early planning also allows you to spread out your financial commitments, making them more manageable alongside other responsibilities.

At WealthWisher, we understand that planning for your child’s future can feel overwhelming. That’s why we’re here to guide you every step of the way. Whether it’s calculating costs, choosing the right investment instruments, or creating a comprehensive financial plan, our expertise is at your service.

Don’t let the fear of future expenses weigh you down. Start planning today, and give your child the gift of financial security and a brighter tomorrow.