Case 3: How Mr & Mrs Raj planned for their Child Education & Marriage
Oct 29, 2013

Author: PersonalFN Content & Research Team

All of us want our kids to have a successful career and a joyful life but successful career does not come with ease. We all know there is a huge competition and to ensure successful career, we need to provide quality education to our children. While we do our best to give our children the best food, clothing etc. then why not give them the best education. After all education is the path to success which will make the child financially independent.

Having similar thought in mind, one of our clients Mr. & Mrs. Raj wanted to secure the future of their child, by planning for his education and marriage.

Let's take up their case and see how proper planning can help one plan for their child's education and marriage.

Personal Details
Name	Age	Income
Mr. Raj's Salary	35 years	Rs 40,000 per month
Mrs. Raj's Salary	30 years	Rs 30,000 per month
Son	3 years	N.A.
Expenses		Rs 45,000 per month
Surplus		Rs 25,000 per month

Personal Details

Mr. Raj a 35 year old married individual and his wife whose age was 30 years had a 3 year old son. Mr. Raj was earning Rs 40,000 per month while his wife was earning Rs 30,000 per month, thus having a total family income of Rs 70,000 per month. As their expenses were around Rs 45,000 per month, they could have a surplus of around Rs 25,000 on a monthly basis.

He had the following assets as depicted in the table below.

Assets
S.No.	Type of Assets	Amount (Rs)
1	Equity Shares	125,000
2	EPF (Self)	200,000
3	EPF (Spouse)	90,000
4	PPF (Self)	500,000
5	PPF (Spouse)	300,000
6	Residential Flat	3,000,000
7	Physical Gold	1,000,000
8	Cash in Bank (Self)	200,000
9	Cash in Bank (Spouse)	100,000
Total		5,515,000

Assets...

So, you can see that Mr. & Mrs. Raj had total assets worth Rs 55 lakhs, of which Residential Flat comprises of more than 50% of his total assets. They were staying in the residential flat so it was not available for planning purpose. They had small amount of investment in equity via Shares and physical gold which was mostly in the form of gold ornaments of Mrs. Raj. They also had their individual EPF , PPF and Cash in Bank accounts. The Cash in Bank was mainly kept for contingency purpose. (Download our: Equity Guide to know how to build a stock portfolio)

However Mr. & Mrs. Raj did not have any liabilities.

And here was Mr. & Mrs. Raj's Financial Objectives!

They were very concerned about their Son's future. So they wanted to plan for his graduation at the age of 18 years' worth Rs 8 lakhs, post-graduation at the age of 21 years' worth Rs 20 lakhs and marriage at the age of 25 years' worth Rs 15 lakhs. (All costs are current values) (Also Read: 7 Steps to Plan Your Child's Education to know how you can determine the cost of child's education)

Financial Goal	Current Cost (Rs)	Time to Goal (Years)	Future Cost (Rs)	Required Per Month Investment (Rs)
Graduation	800,000	15	3,341,799	6,623
Post-Graduation	2,000,000	18	11,119,835	14,527
Marriage	1,500,000	22	12,210,412	9,422
Total				30,573

(Note: Inflation considered at 10% per annum and investment return considered at 12% per annum)

Mr. & Mrs. Raj needed to make a total investment of Rs 30,573 per month to achieve just these 3 goals, while they had a surplus of Rs 25,000 per month. They wanted to know how they can plan for their child's goals.

PersonalFN recommended them the following:

Graduation Goal: Since Graduation is the highest priority goal, we advised them to a start a SIP of Rs 6,623 per month. SIP was advised across Equity, Debt & Gold in the allocation of 80%, 10% and 10% respectively for 15 years. (See our Video: Building your Wealth with Wise Investing to know what care you need to take while investing so that you can successfully build a corpus for your life goals.)
Post-Graduation Goal: Post-Graduation is the next priority goal, but the amount required for this goal was very high. If they were to start a SIP of such a high amount, they would have sacrificed on all other financial goals. So, we advised them to start a SIP of Rs 10,000 per month and increase it by 25% after every 3 years. They could easily do so as their salaries would increase in future and they can easily increase their investment amount for this goal as well. SIP was advised across Equity, Debt & Gold in the allocation of 80%, 10% and 10% respectively for 18 years. (Also Read: How discipline & regular investing can help you meet your financial goals? to know how investing regularly via SIPs can help you to meet your financial goals)
Marriage Goal: Marriage was the least priority goal among these 3 goals and it was difficult for them to start a SIP for this goal immediately. So we advised them to start a SIP of Rs. 18,500 per month after 7 years and increase it by 20% after every 3 years. SIP was advised across Equity, Debt & Gold in the allocation of 80%, 10% and 10% respectively for 15 years.
Other Financial Goals: After planning for the child goals, their total investment is just Rs 16,623 per month while they had surplus of Rs 25,000 per month. So they can still invest Rs 8,377 (Rs 25,000 - Rs 16,623) for other financial goals such as retirement, vehicle, vacation or any other financial goal they might have.

We did not utilize any of their current assets as cash in bank was kept for contingency purpose, physical gold was mostly gold ornaments and EPF & PPF account can be dedicated to other financial goals such as retirement.

Even though Mr. & Mrs. Raj thought their surplus amount is insufficient to fund for their child goals leaving aside all other goals, but proper planning helped them not only to plan for their child goals but also plan for other financial goals.

Key learning's from this case study:

You should prioritize your goals and plan for them accordingly. (See our Video: Identifying your Financial Goals to know how to identify and prioritize your financial goals)
You should factor in the expected rise in future income while planning for your financial goals.
You don't need to plan for all goals immediately; some of them can be deferred till the time your income increases.
If your goals are not achievable even after projecting future increase in income, then you should review and decrease the amount of your least priority goals.

If you too want to plan for your children future but don't know how to start with it, then do not hesitate to call us on 022-61361200. You can also Schedule a Call with our investment consultant or even drop a mail at info@Personalfn.com and we will get in touch with you. We would be happy to plan your finances prudently to help you achieve your life goals.

You see, this was the 3rd Case of our series of 4 Real Life Financial Planning Case studies, to be published every Tuesday. Watch out for our next topic on Financial Planning Real Cases: