I'm 41 and have annual income of Rs 6 lakh. How should I plan my savings for my two kids' future?

I have an annual income of Rs 6 lakh now. My age is 41. How do I make a savings plan for 2 kids' future? Education and weddings are priority needs.

Reply by Mayank Bhatnagar, Chief Operating Officer, FinEdge

You have not mentioned the ages of your kids, but irrespective of the time remaining for their goals, a few general guidelines apply. The first step is to work with a professional investing expert to set up a clearly defined goal-based financial plan. This is especially critical because most people end up either not factoring inflation into their calculations or not accurately ascertaining how much they need to save for their goals every month. An expert can help you accurately determine both so that you can be sure that you are starting off with the correct math.

Say, for instance, that you want to save today’s equivalent of Rs 10 lakh for your kid’s education in 8 years’ time. By the time your goal date arrives, the cost of the degree will be at least Rs 17-18 lakh. So, factoring inflation into the equation becomes critical.

Secondly, make sure that you take measured risks in sync with the goal timeline. If any of your goals are more than 5-7 years away, you should ideally start SIPs in equity-oriented funds that have the potential to deliver much higher returns than avenues like FD’s or fixed-income instruments. To succeed with your equity investments, you should be very clear on what to expect along the way. Volatility is the price to be paid for these high returns!

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Remember, even if the amount seems daunting today, you should start off with what is comfortable and implement a disciplined step-up process from day one. The impact of small, incremental step-ups can be quite spectacular if your goals are long-term in nature.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)