When you plan to save and invest money, keeping the goal in mind makes the process easier. The goal can be just to deposit a certain amount, to buy a house, to take a vacation, to buy a car or even to pursue your child’s dream education. . Depending on what the goal is, you can smartly plan ahead and move yourself closer to it.
Savings funds can be divided into two parts – discretionary and essential. Discretionary savings funds are driven by a goal specific to you. It could be for a special car, house, your favorite vacation or whatever else is on your mind.
Essential savings funds, on the other hand, are meant for events that are unavoidable. These include your emergency fund, your retirement fund and, if you are a parent, a higher education fund for your children’s education.
Simply put, you can postpone your discretionary fund goals without having much impact on your family’s well-being, but this is not possible with your essential fund goals. You cannot postpone hospital bills, your retirement or your children’s higher education.
The question that often comes to parents’ minds is: How to set goals when opportunities are so diverse and costs vary? The right way to go about it is that you want to give the best of opportunities to your child, whether they are from the best institutions in India or abroad. In addition, adjusting for inflation, living expenses must be added as well.
There are also education cost calculators that can help you solve this. They generally account for more variables including the city of study, country, and more. Once you have the target amount, a regular SIP and the power of compounding can easily achieve it when you have the time.
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