Wondering if investments are a good option for your child’s future? Not sure when or where to start? This article details why early investments not only serve the purpose of helping your kid realize their dreams but also secure the entire family’s future simultaneously.
Now there is a fine solution to avoid all kinds of bewilderment and anxiety surrounding the expenditure for your child’s college education. It is called early investment.
Be it investing in mutual funds, or directly into stocks, investing from the beginning of your family life is the way to go. Especially, if you have children or planning to have kids, now is the time to begin if you haven’t already begun.
Here is a list of reasons why investing early is good for your children’s future.
1. Planning is key
Plan your investments like you plan your savings – smart and quick. Savings play an important role in building up an education fund for your kid.
But savings alone are not enough to accumulate enough wealth. This is where investments come in.
Break up your investment goals like you would with your savings. Your emergency fund or retirement fund should not get muddled up with your kid’s college fund.
Don’t worry about the exact amount of money you ought to invest. Start with small amounts depending on how much you can spare from your income.
2. Scope to diversify investments
Part of your planning for investments should be to decide how to diversify them. For example, you can read up on how different mutual fund schemes work and decide on investing in more than one.
This way, you will not be at the sheer mercy of market fluctuations.
You are also advised to go for international equity stocks if you expect your kid to pursue their college education abroad in the future. Investing in foreign stocks is an effective way of balancing the pressure of education inflation.
The earlier you begin, the more time you will have on your hand to patiently do your research or even consult a financial expert if required.
3. The boon of compounding
The simplest logic behind indulging in early investments is the same as the logic of early savings. With more time, a larger amount of wealth gets accumulated. But investments enjoy an added benefit – compounding.
The extra amount of money you earn in the first round of investments later adds to the amount you originally invested. This means your money will be multiplying at increased rates as time goes by.
This is also why investments are a superior option when compared to saving and more importantly, why you should start investing immediately.
4. The most secure future
Investing early in your child’s future education is not simply about securing their future. It is also about creating a hassle-free retirement life for yourself.
Now even if your child desires to go to a foreign institution, you will be able to back them up without having to sacrifice your retirement fund.
Moreover, in most cases, the tax liability is way less when you start investing at the beginning of your career. This way you save more money.
For later, you can go for tax-saving investment options like ELSS to make the best out of your investments. SIPs make investing even more effortless as you will not have to worry about it manually investing your money every month.
5. Setting an example for your kids
If you are a new parent or have a kid on the way, this tip is specifically directed toward you. It is important to remember that kids learn by imitating adults.
When you teach them the benefits of saving and investing early, they start growing a consciousness that will shape their financial habits when they grow up.
Make your kids a part of the investment plan as soon as possible. You can later turn them into the beneficiaries of the funds you have built for them. By that time, they will be adept at managing the economic resources at their disposal.
FAQs
Why investing early is so important?
Investing early is important. It helps you find a sizable fund for your child and family’s financial goals. Whether its paying for your child’s education or buying a house, investing can help you achieve financial goals.
What are 3 benefits of investing?
The 3 benefits of investing are:
- Beats inflationary prices
- Helps you grow wealth and meet different financial goals
- Allows you to reap benefits of compounding
Why is education called an investment?
Education is an investment in itself because it is the means to an end. End goal like better lifestyle, job opportunities and personal growth. It is the best way to grow as an individual and provide a better life to yourself and your family.
Conclusion
Investing early in your kid’s college fund not only takes away the pressure of student loans but also helps them focus on academics and their career.
