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Do you recall this popular saying,
‘Failure to plan is planning to fail’? Even as your baby starts his
journey in life, you know that you should start planning the education
fund for his future so that he can get the best out of life later on.
Of course, this is easier said than done as many parents often find it
difficult to save when they can barely make ends meet every month. So,
what is the secret?
According to investment experts, it lies in {starting early and staying
focused}. The more time you have, the more risks you can afford to take
and the longer time there is for the money to grow.
A Little A Month…
To find out how much you can save, first
calculate the monthly take-home pay of both you and your spouse. Then
subtract your monthly household expenses, loan repayments and other
fixed expenses from this amount.
Experts advise that you retain at least one quarter or one third of
your monthly salary for savings. The most important thing is to put
aside something every month no matter how small the amount. Start with
a smaller amount (maybe 100 dollars per month), and increase the amount
as your salary increases. lf you are unable to save, you can arrange to
have the amount of your savings automatically deducted from your bank
account. Known as 'forced savings', long-term savings through such a
scheme will be reflected in the greater growth of your child's
education fund.
Investment Options
Examine all the investment options
available to you before you begin saving for your child education fund
so that you can make an informed choice. Understanding your own risk
profile is the first step to successful investing. Some questions you
should therefore consider are:
* Are you willing to take high risks in exchange for long-term returns?
* Is your job secure enough for you to take those risks?
* Do you have other pressing financial commitments which require you to
lower your risk profile?
The ideal savings plan is naturally the one that keeps your money
working the hardest for you through the years. Do get a financial
consultant to help you develop an investment plan to suit your
individual needs. Here are some options for consideration:
Long-Term Investment
The stock market provides the best
opportunity for long-term growth and the highest returns on your money,
but it also involves a lot of risk-taking at the same time.
Furthermore, you may have to wait for some time to see the results.
Other high-performing financial investments include equity-based unit
trusts and foreign currency accounts.
Medium-term Investment
Unit trusts can protect your investment
and also provide respectable returns for your money. Choose unit trusts
which are managed by a good fund manager, and lower your risk with
diversified investments.
Short-Term Investment
lf time is short and you need the money
within the next 5 years, avoid risk in your investment as much as
possible. Choose fixed income assets, such as fixed deposits, bonds and
debentures.
Education Savings Plan
These are generally low-risk and
fixed-income assets, provided the monthly or annual premiums are
faithfully paid.
Education savings plans are helpful for those who find it difficult to
enforce a savings habit. Most of these plans can be tailor-made to your
individual needs, and you can also choose one which automatically
deducts from your savings accounts every month or year.
Look for those which are also insurance-linked to serve your financial
objective of waiving the premiums in the event of your death or
disability.
Even if your child eventually does not need the education fund, the
additional savings can be used to start a small business or broaden his
horizons through travel, for instance.
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