Answer Book question
Start early, invest in equity-oriented funds for goals more than seven years away, shift gradually to debt as the date approaches, and target a number that assumes fees rise faster than general inflation. A ₹500 SIP at birth is worth more than a ₹5,000 SIP at fifteen. Insurance products sold as "child plans" are usually expensive ways to do this badly.
Start early, invest in equity-oriented funds for goals more than seven years away, shift gradually to debt as the date approaches, and target a number that assumes fees rise faster than general inflation. A ₹500 SIP at birth is worth more than a ₹5,000 SIP at fifteen. Insurance products sold as "child plans" are usually expensive ways to do this badly.
Two families in Kottayam. One buys a "child plan" at the child's birth paying ₹36,000 a year; at 18 it returns about ₹11 lakh. The other invests ₹3,000 a month in an index fund; at 18 it is worth roughly ₹19 lakh, and the father also holds a ₹1 crore term policy that protects the plan if he dies.
Education is a dated goal with a rising cost. Equity for the long stretch, debt for the last three years, and life cover on the parent so the plan survives the parent's death. The "child plan" bundles these badly at a high cost.
Years to the goal Realistic future cost. professional course fees have risen sharply Monthly amount affordable Glide path: when to shift to debt Parent's term cover Sukanya Samriddhi for a daughter, PPF for flexibility
Buying a child plan because the agent said "for the child."
Kerala families aim high. medicine, engineering, overseas study. Cost the actual course today and add growth.
Target ₹25 lakh in 15 years. ₹5,000/month at 11 percent ≈ ₹23 lakh. Shift to debt from year 12. Term policy on the parent of ₹1 crore.
For a goal within five years, equity is wrong; use debt and FDs.
Cost the goal Start the SIP Buy the parent's term cover
What is Sukanya Samriddhi and is it worth it? What exactly is an SIP? How much life insurance do I need?
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