Hi, I am a single mother abt 35 yrs age and earning approx 75k per month. I can save only approx 30k per month currently. I wish to start a daycare/creche services of my own. How much investment would be required for it and should I choose any franchise to go ahead with it? Is there any pre-requisites for it? I am not much of social person or easy to get friendly with kind of person, will that be a negative point if I go ahead with my plan? However I am very fond of children and love them. What would be the expected return from such business ot staying in service would be wiser? Kindly guide.

Ans: You can do both, but it would be better to get a franchise of a large chain as the systems , processes and controls would be well defined, and brand building will not be on your head.

Ans: I am sure you have a pretty good track record since you have managed to run a pre-school for 10 years. Ideally you should target friends, family and extended network with money and interest in this space as potential investors as they know you personally and professionally. Plus they can also help in other ways- getting you teachers, managing the local environment, popularising the school in your catchment areas, perhaps even come in as co-founder looking after specific activities. Pl also consult local CAs and financial consultants who can help organise debt financing.

Ans: Given your financial situation and goals, here's a suggested investment plan:

Emergency Fund: Start by building an emergency fund equivalent to 6-12 months of your living expenses. Keep this fund in a liquid and easily accessible account like a savings account or a short-term fixed deposit.

Insurance: Ensure you have adequate life and health insurance coverage. Given your responsibilities as a single mother, having a term insurance plan can provide financial security for your child's future.

Investment in Child's Education: Since you already have a child education policy and PPF, consider adding an equity-oriented mutual fund to potentially earn higher returns for your child's education expenses.

Retirement Planning: Start investing in retirement-focused mutual funds or retirement plans. Given your age, investing in equity-oriented retirement funds can provide good returns over the long term.

Real Estate: Since you own two apartments, consider the rental income from one apartment as a source of passive income. Regularly review the rental income and expenses to ensure it aligns with your financial goals.

Additional Investments:

Mutual Funds: Start a monthly SIP in diversified equity funds for long-term wealth creation.
PPF: Continue investing in PPF for tax benefits and fixed returns.
Debt Funds: Consider investing in debt funds for stability and regular income.
Gold or Gold Funds: Allocate a small portion to gold or gold funds for diversification and hedging against inflation.
Financial Planning: Consult a financial advisor to create a personalized financial plan tailored to your needs, goals, and risk tolerance. A professional can help you prioritize investments, optimize tax savings, and achieve your financial objectives.

Remember to regularly review and adjust your investment plan based on changing financial goals, market conditions, and life circumstances. Starting early and maintaining discipline in your investment approach can help you achieve financial security and provide a comfortable future for you and your child.

Ans: It's wonderful that you’re planning for your child's future at an early stage. As a 34-year-old homemaker with a 6-month-old baby girl and a rental income of Rs. 23,000, you have a solid foundation to build on. Let’s craft a comprehensive financial plan to secure your child’s education and maintain a good lifestyle.

Understanding Your Financial Goals
Firstly, let's identify your primary financial goals:

Child's Education: Ensure there are adequate funds for your daughter's education.

Emergency Fund: Maintain an emergency fund to cover unexpected expenses.

Retirement Savings: Even as a homemaker, having a secure retirement plan is essential.

Insurance: Adequate life and health insurance to protect your family’s financial future.

Analyzing Your Current Financial Situation
Income and Investments:

Rental Income: Rs. 23,000 per month.
Current Investment: Rs. 5 lakhs in LIC.
Given your current income, it's crucial to allocate your funds efficiently to achieve your financial goals.

Building an Investment Portfolio
1. Emergency Fund
An emergency fund is the cornerstone of financial planning. It should cover at least 6-12 months of expenses.

Monthly Expenses: Assume Rs. 15,000 (excluding savings and investments).
Emergency Fund Required: Rs. 90,000 to Rs. 1,80,000.
Start by setting aside a portion of your rental income until you build a sufficient emergency fund. You can keep this money in a savings account or a liquid fund for easy access.

2. Child's Education Planning
Investing for your child's education is a long-term goal. Here’s how you can allocate your investments:

A. Mutual Funds

Mutual funds are a great way to build wealth over the long term. Consider the following categories:

Equity Mutual Funds: These funds invest in stocks and have the potential for high returns. They are suitable for long-term goals like education.

Hybrid Mutual Funds: These funds invest in a mix of equity and debt instruments, providing a balance of risk and returns.

B. Systematic Investment Plan (SIP)

A SIP is a disciplined way of investing in mutual funds. It allows you to invest a fixed amount regularly, thereby averaging the cost of investment and reducing risk.

Start a SIP in equity mutual funds for your child's education. This will take advantage of the power of compounding.
C. Government Schemes for Girl Child

Government schemes like Sukanya Samriddhi Yojana (SSY) are designed to support the financial future of girl children. They offer attractive interest rates and tax benefits.

Open a Sukanya Samriddhi Account and contribute regularly. The maturity period aligns well with the timing of higher education expenses.
3. Retirement Planning
Although you’re focused on your child's future, it’s also important to think about your retirement. You can consider the following:

A. Public Provident Fund (PPF)

PPF is a government-backed savings scheme that offers tax benefits and attractive returns. It has a lock-in period of 15 years, making it suitable for long-term goals like retirement.

Open a PPF account and invest regularly. You can invest up to Rs. 1.5 lakhs per year in PPF.
B. Mutual Funds

Apart from education, you can also use mutual funds for retirement planning. A mix of equity and hybrid funds can provide the growth needed for a substantial corpus.

Allocate a portion of your rental income to SIPs in mutual funds targeted at retirement.
Diversifying Your Investments
Diversification is key to managing risk and ensuring steady returns. Here’s how you can diversify your investments:

Equity Mutual Funds: High growth potential but higher risk. Suitable for long-term goals.
Debt Mutual Funds: Stable returns with lower risk. Suitable for short to medium-term goals.
PPF: Government-backed with tax benefits. Suitable for long-term goals.
Gold: Acts as a hedge against inflation. Allocate a small portion of your portfolio to gold.
Risk Management
A. Insurance

Ensure you have adequate insurance coverage to protect your family’s financial future.

Term Insurance: Provides financial security to your family in case of your untimely demise. Ensure your coverage is sufficient to cover your family's needs.

Health Insurance: Covers medical expenses and protects your savings. Consider a family floater plan to cover yourself and your child.

B. Emergency Fund

Maintain an emergency fund to cover unexpected expenses. This provides financial stability and peace of mind.

Tax Planning
Maximize tax-saving investments to reduce your tax liability and boost your savings.

Section 80C: Invest in PPF, SSY, ELSS, and other tax-saving instruments to avail tax benefits under Section 80C.
Section 80D: Avail tax benefits on health insurance premiums under Section 80D.
Regular Review and Adjustment
Financial planning is an ongoing process. Regularly review and adjust your investment portfolio to ensure it aligns with your financial goals and risk tolerance.

Annual Review: Review your financial plan at least once a year.
Adjust Investments: Adjust your investments based on changes in your financial goals, market conditions, and risk tolerance.
Power of Compounding
The power of compounding works best when you start investing early and stay invested for a long time. The interest earned on your investments gets reinvested, which in turn earns more interest. This cycle continues, leading to exponential growth of your investment over time.

Final Insights
Achieving your financial goals requires disciplined saving and investing. Here are some final insights to help you stay on track:

Start Early: The earlier you start investing, the more time your money has to grow.

Be Disciplined: Stick to your investment plan and avoid unnecessary expenditures.

Diversify: Diversify your investments to manage risk and ensure steady returns.

Seek Professional Advice: Consult a Certified Financial Planner (CFP) for personalized financial advice.

By following this comprehensive financial plan, you can ensure a secure future for your child and maintain a good lifestyle.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in