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Financial Planner - Answered on Apr 30, 2024

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Asked by Anonymous - Apr 18, 2024Hindi

I have Rs 1.2 crore in my bank account. My wife earns Rs 80,000 per month and I earn Rs 2 lakh per month. We have three children – two daughters and one son – who will need approximately 10 to 15 lakh each for their higher studies 7 to 12 years from now. How shall I go about meeting my children’s education goal and also plan for my retirement. My wife and I have about 15 and 7 years for our retirement.

Ans: It's great that you're thinking ahead for your children's education and your retirement! Here's a suggested plan to meet your goals:

1. Children's Education Fund:

• Since you have 7 to 12 years for your children's higher education, you can invest in relatively aggressive investment options like mutual funds or diversified equity funds. These have the potential to offer higher returns over the long term.
• Allocate a portion of your savings every month towards this goal. Considering inflation and assuming an average annual return of 10%, you would need to invest roughly Rs 20,000 to Rs 25,000 per month to accumulate the desired amount for each child's education.

2. Retirement Planning:

• Since you and your wife have 15 and 7 years left for retirement respectively, you'll want to focus on building a retirement corpus.
• Consider investing in a mix of equity and debt instruments to balance risk and returns. You can invest in mutual funds, provident funds, and Public Provident Fund (PPF) for a balanced portfolio.
• Aim to save at least 15-20% of your combined monthly income for retirement. Considering your current earnings, you can aim to save around Rs 50,000 to Rs 60,000 per month for retirement.

3. Asset Allocation:

Since you have a relatively long investment horizon for both goals, you can afford to have a higher allocation towards equities for potentially higher returns. As you approach your retirement age, gradually shift towards more conservative investment options to preserve capital.

4. Emergency Fund:

Make sure to maintain an emergency fund equivalent to 3-6 months of your combined living expenses. This fund should be readily accessible in case of unexpected expenses or emergencies.

5. Regular Review:

Regularly review your investment portfolio and make adjustments as needed based on changes in your financial situation, market conditions, and investment goals.

6. Professional Advice:

Consider consulting with a financial advisor to tailor a plan specific to your financial goals, risk tolerance, and investment preferences.

By following this plan diligently and investing consistently over the years, you should be well-prepared to meet your children's education expenses and enjoy a comfortable retirement.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.