38, Govt Dad: My Kids' Education Fund?

Ans: Given your family's financial situation and goals, it's crucial to create a comprehensive investment plan that considers both growth and stability. Here's a suggested approach:

Education Fund for Daughters: Since your daughters are nearing college age, consider setting aside a portion of your investments specifically for their education expenses. You may allocate a portion of your bank FDs and MF investments towards this goal, ensuring it grows over time to meet their educational needs.
Retirement Planning: As you and your wife approach retirement, it's essential to prioritize building a sufficient corpus to support your lifestyle in old age. Consider diversifying your investment portfolio to include a mix of equity, debt, and balanced funds, along with retirement-focused instruments like the National Pension System (NPS) or Senior Citizen Savings Scheme (SCSS).
Health and Insurance: Ensure you have adequate health insurance coverage for your family's medical needs. Additionally, review your existing LIC policies to ensure they align with your current financial goals and provide adequate coverage for your family's future needs.
Monthly Income: To generate regular income for your household expenses during retirement, consider investing in dividend-paying stocks, mutual funds with dividend options, or fixed income instruments like Senior Citizen Savings Scheme (SCSS) or Post Office Monthly Income Scheme (POMIS).
Regular Review and Adjustment: Regularly review your investment portfolio to track its performance, make necessary adjustments, and ensure it remains aligned with your financial goals and risk tolerance.
Consulting with a Certified Financial Planner can provide personalized guidance tailored to your family's specific financial situation and goals. Together, you can create a customized investment plan that addresses your needs for growth, income, and financial security.

Ans: Your financial position is strong with no liabilities.

Monthly rental income of Rs. 3 lakhs covers your expenses and lifestyle.

Monthly expenses of Rs. 50,000 and annual expenses of Rs. 3.25 lakhs leave ample surplus.

You have diversified assets, including equity (Rs. 1.2 crore), PMS (Rs. 85 lakhs), real estate (Rs. 9.6 crore), and regular rental income.

You lead a simple life, which allows significant potential for wealth accumulation and legacy planning.

Investment Goals
Your primary focus is to:

Ensure financial security for your family.

Support your daughter and grandchildren’s education and future needs.

Maintain sufficient liquidity for personal travel and unexpected medical costs.

Recommendations for Asset Allocation
1. Equity Investments
Your current direct equity portfolio (Rs. 1.2 crore) and PMS (Rs. 85 lakhs) are commendable.

Direct equity requires active tracking and expertise.

Shift part of your direct equity to regular mutual funds through a Certified Financial Planner.

Regular funds offer professional management and long-term growth.

Retain PMS if it meets your return expectations and aligns with your risk appetite.

2. Emergency Fund
Allocate 6–12 months of expenses to liquid funds.

This ensures liquidity for unexpected expenses or emergencies.

Investments for Daughter and Grandchildren
1. Education Fund for Grandchildren
Start investing in child-focused mutual funds for their education.

Choose regular funds through an experienced Certified Financial Planner.

These funds offer professional management and goal-based growth.

Systematic Investment Plans (SIPs) in equity funds can help accumulate the required corpus.

2. Legacy Fund
Invest in diversified mutual funds for wealth creation.

Choose a mix of large-cap, flexi-cap, and balanced advantage funds.

This portfolio can grow steadily while preserving wealth.

Real Estate Diversification
Avoid further investments in real estate.

Real estate is illiquid and challenging to manage during retirement.

Liquidate one property if diversification is needed.

Use the proceeds to invest in mutual funds or bonds.

Fixed Income Options
Consider investing in corporate bonds or debentures for steady income.

Choose bonds rated “AAA” for safety.

Avoid annuities as they provide low returns and limited flexibility.

Tax-Efficient Planning
Review tax-saving strategies with a Certified Financial Planner.

Equity investments (LTCG above Rs. 1.25 lakh taxed at 12.5%) are tax-efficient.

Ensure proper tax documentation for real estate and rental income.

Track PMS returns and tax implications yearly.

Liquidity and Annual Expenses
Set aside Rs. 25–30 lakhs in a liquid fund.

This covers your annual travel, property taxes, and medical expenses.

Keep medical insurance for yourself and your family updated.

Succession and Estate Planning
Create a will to ensure smooth asset transfer.

Include clear instructions for property distribution.

Discuss creating a trust for your grandchildren’s education and future needs.

Travel and Lifestyle Funding
Use rental income surplus to fund annual travel.

Avoid withdrawing from long-term investments for discretionary expenses.

Final Insights
You have built a strong financial foundation.

Focus on simplifying investments for better management.

Diversify and invest in professionally managed mutual funds.

Plan for family needs with a balanced approach to risk and growth.

Regularly review your portfolio with a Certified Financial Planner.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: Hello;

Please provide following inputs:

1. Average monthly expenses (regular)

2. Total loan EMIs for a month

3. Emergency fund/EPF/PPF balance, if any.

This will help to guide you suitably.

Thanks;

Ans: Your structured planning so far is truly appreciable. You are managing your income, loan EMIs, insurance, and child savings well. That shows your sincerity.

Let us assess your financial standing and suggest a child education investment plan that is well-aligned with your life goals.

Monthly Income and Deductions
Your take-home salary is Rs. 72,000 per month.

PLI premium of Rs. 4,000 is already being deducted.

10% contribution towards NPS also goes from your salary.

Flat EMI of Rs. 35,000 is a large fixed commitment every month.

SSY contribution of Rs. 12,500 per month started this year.

You are left with limited surplus every month.

However, this will improve in 2 years once EMI reduces.

Evaluation of Current Commitments
PLI maturity value of more than Rs. 20 lakhs in 2031 is good.

This can be used for daughter’s higher studies later.

Flat EMI is manageable now but restricts fresh investment.

SSY account for daughter is a wise long-term choice.

Good that your health is covered under CGHS.

Term insurance of Rs. 1 crore is a responsible decision.

Understanding Future Education Costs
Your son is 8 years old now.

He will go to college in 10 years.

Your daughter is 5 years old.

She will go to college in 13 years.

Higher education costs are increasing 8%-10% yearly.

Engineering, medicine or abroad studies need larger funds.

Investment Strategy for Children’s Education
Let us now plan how you can invest from your surplus for your children’s future.

Short-Term Focus (Next 2 Years)
Flat EMI is Rs. 35,000 per month.

You also invest Rs. 12,500 monthly in SSY.

That totals Rs. 47,500 per month of fixed outflow.

After that, Rs. 24,500 remains from Rs. 72,000.

Keep Rs. 5,000 monthly for unexpected expenses.

Use the rest for starting a monthly investment.

Start with Rs. 10,000 SIP from now in equity mutual funds.

Choose balanced and child-focused mutual funds.

Invest through a Certified Financial Planner for better support.

Avoid direct plans. Regular plans with guidance are better.

Direct plans offer no personal advice or help during market falls.

Regular plans offer MFD + CFP expertise and investment hand-holding.

After 2 Years (When EMI Ends)
You will get back Rs. 35,000 of monthly surplus.

You should increase your SIP from Rs. 10,000 to Rs. 25,000.

This will create a strong corpus in 10+ years.

Continue this SIP regularly without breaks.

Use this for son’s college when he turns 18.

Later, same SIP will help your daughter too.

Diversify across multi-cap, large-mid cap and flexi-cap mutual funds.

Why Not to Invest in Real Estate Again
Real estate needs high capital and long lock-in.

It does not offer regular returns or liquidity.

Focus on financial instruments that are flexible.

Mutual funds offer liquidity, diversification and long-term returns.

Also, real estate has maintenance cost and tax complications.

Avoiding ULIPs and Insurance-Based Investments
ULIPs mix insurance with investments.

That leads to higher costs and lower returns.

You already have term insurance, which is sufficient.

So do not buy child ULIP or endowment plans.

Focus only on mutual funds for wealth creation.

Investment Account in Your Name
All SIPs should be in your name.

You can make your children as nominees.

There is no need to open accounts in their name.

You will control and manage the investments better.

Withdraw when needed for their education expenses.

Emergency Fund Creation
Keep Rs. 1.5 to 2 lakh as emergency fund.

Use bank FDs or liquid funds for this.

Do not touch mutual fund investments for emergencies.

Emergency fund protects your long-term goals.

Tax Planning for You
You already claim 80C through SSY and PLI.

ELSS mutual funds can also give 80C benefit.

ELSS has 3-year lock-in and offers long-term growth.

Consider small SIP in ELSS for dual benefit.

Avoid exceeding 80C limit to keep your cash flow free.

Benefits of Regular Mutual Funds
Regular plans offer guidance from Certified Financial Planners.

You get customised fund selection as per goal.

There is annual review and correction support.

In difficult markets, professional advice keeps you on track.

This support is not available in direct mutual fund plans.

Not Recommending Index Funds
Index funds follow market passively.

They offer no protection in down markets.

Active mutual funds perform better in Indian markets.

They also help during corrections and offer better stock choices.

Certified Financial Planner will help you select suitable active funds.

Tracking Investment Progress
Every year, check your SIP growth.

Don’t stop SIP even if market goes down.

Review fund performance with a planner yearly.

Shift funds only if performance is weak for 3 years.

Future Withdrawals and Usage
Withdraw from mutual funds only when needed.

Withdraw gradually during college years.

Use the Systematic Withdrawal Plan (SWP) for smooth cash flow.

That avoids market timing and helps better tax planning.

Discipline is the Key
Consistency will create a large corpus.

Start small, increase later, but never stop.

Avoid panic during market corrections.

Keep a long-term mindset always.

Education Goal Summary
SIP of Rs. 10,000 now, Rs. 25,000 later.

Stay invested for next 10-15 years.

Do not withdraw for any other reasons.

Don’t use it for marriage or house purchase.

Keep it strictly for education expenses.

Insurance Review
Your term plan is Rs. 1 crore.

Review it every 5 years.

Don’t buy new insurance policies for savings.

PLI will mature soon and give lump sum.

Use it only for your daughter’s college.

Summary of Key Actions
Create emergency fund of Rs. 2 lakh.

Start SIP of Rs. 10,000 now.

Increase SIP to Rs. 25,000 after EMI ends.

Avoid real estate, ULIPs, endowment plans.

Avoid direct mutual funds.

Avoid index funds.

Invest via Certified Financial Planner only.

Review every year. Stick to long term.

Finally
You are doing many things right already. Your discipline and awareness are your strength. With the right investments and consistent SIPs, you will meet your children’s education goals peacefully. Use mutual funds with expert help, avoid distractions, and invest regularly.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment