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The birth of a child is an important event for every parent. It marks the beginning of prayers, blessings, and celebrations to welcome the new member in their lives. They do everything to ensure the happiness of their child. But, it is also important to start thinking about their future and take some basic steps to secure it.
It can be a difficult task to plan for the financial future of your child. However, mutual funds can help you in overcoming the challenges. Following are five essential steps you should follow to protect your child’s future by investing in mutual funds.
#Step 1: Set Clear Goals
The first step towards investing is to figure out your investment goal. As a parent, you should know exactly what you are investing for and that is why you need to set financial goals for your child. For instance, you may plan to save for your child’s school and college admission, or his/her degree from a foreign university, or maybe his/her marriage. Once you are clear on these goals, you can then think about what kind of money you would need to achieve them.
#Step 2: Start Early and Choose the Right Fund to Achieve Your Goals
Once you know your goals, start saving as early as possible by setting some money aside before spending the rest. As you cultivate this healthy habit, begin your research and learn which mutual fund is ideal for your goals. For instance, if you have a short-term goal like your child’s school admission in a few years, your primary focus should be capital preservation. You can invest in short duration debt funds or fixed deposits to fulfil these goals on time. On the other hand, for long-term financial goals, you can invest in equity mutual funds that deliver inflation-beating returns consistently over the long run.
#Step 3: Start Easy with SIPs to Save Towards Your Goal
As a young parent, you might be worried about your other responsibilities and expenses. SIPs are the easiest way to develop a habit of disciplined investing in mutual funds. You can invest a fixed amount of money every month, which over the years helps you reach your target amount in time. Check for the top-performing mutual funds, read their offer document carefully to understand the risks, and make a smart and informed decision to invest.
#Step 4: Use SIP Top-Up
As every year your income and salary increases, you can boost your allocation to SIPs by using the SIP top-up, allowed by several mutual fund houses. A timely boost every month can make a big difference in the final amount that you will receive.
#Step 5: Do Not Stop Investing
Remember that the future goals of your children are time-bound. So, you cannot miss or stop your investments midway as it will hurt your prospects of reaching your goals on time. If you have to stop investing for some reason, make sure to cover it up by adding money later to your funds.
If you are financially responsible, you can shape a positive and promising future for your children. With these five steps, you can stay on the course of your investment journey and achieve your set goals.
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