Planning is a scary thing, but planning your child's future is even more so. Our expert, Kartik Jhaveri makes life simpler for us and tells us everything we need to know about planning.

I earn a salary of 60,000 per month. I have a one year old son. Where should I invest for his future? My savings so far:

1. I have one ULIP policy and a LIC policy, where I pay a premium of Rs 36,000 per annum.
2. I do a SIP in mutual fund for Rs 5,000 per month.

I want to invest in a child plan and also do tax savings. What should I do?
-- Rakesh Sharma

Child planning is more complex that most people can imagine. Your financial plan should enable:
- Liquidity
- Flexibility
- Best possible returns

Your plan should not have any pre-designed pattern, such as, trying to get payout when your child graduates. The problem with a pattern lies in the suitability, that is, how do you know the pay out will be enough? What if you need more?

There is a better way to go about your planning! Follow these steps to make your life and your child's life easier.
Step 1: Estimate how much you want to save for your child. Say, you want to save Rs 100,000 when he/she turns 18. Starting now, one year

Step 2: How much should you provide for your child when he/she is one year of age
Step 3: How much should you provide for your child when he/she is two years of age. Estimate likely expense for each year
Step 4: Project future expenses for each year after considering a higher inflation rate, say 8-9 per cent
Step 5: Ascertain what rate of return you will require. You'd have figured out your risk profile by now.
Step 6: You can choose your investment avenue based on the returns you expect
Step 7: Create a portfolio and deploy

Read: Guide to financial planning

Once you have all seven steps in place, you will find the following results:
1. You will never have to fret about funding your child’s life
2. You will be able to make alterations each year and as and when required
3. You will know if you need insurance policies or balanced funds or aggressive equity funds or direct equity or if you need to revisit your estimates.

Plan now for your child's safe and secure future.

Read: When your budget went all wrong

Illustration: Vaibhav Parekh

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e-mail: Kartik Jhaveri

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