Young parents in India typically have several financial goals, which may include creating a secure financial future for their children. Achieving these goals requires careful planning, budgeting, and investment.
Financial goals of young parents may vary depending on their personal circumstances and priorities. Here are some common financial goals that millennial parents in India might have & how one must plan their investments to achieve the goals:
- Creating a stable and secure financial future for their children: Young parents often want to ensure that their children are financially secure and have access to the resources they need to achieve their goals. This may include saving for their children’s education, creating a trust fund or estate plan, and investing in long-term savings and investment plans.
Investing in mutual funds is a powerful tool to create a stable and secure financial future for their children. Young parents may want to consider investing in equity-oriented mutual funds such as diversified equity funds, large-cap funds, or balanced funds.
Equity-oriented mutual funds invest primarily in stocks and have the potential to generate higher returns over the long term. Diversified equity funds invest in a mix of stocks across various sectors and market capitalizations. Large-cap funds invest in large, well-established companies that are generally considered less risky, while balanced funds invest in both stocks and bonds for a more balanced portfolio.
- Saving for retirement: While retirement may seem far away, it’s important for young parents to start saving early. By investing for retirement, young parents can build a nest egg that will provide financial security in their later years.
Mutual funds can be a good option for retirement planning as they offer several advantages such as diversification, professional management, and flexibility.
When it comes to retirement planning through mutual funds, young parents can consider investing in equity-oriented mutual funds like diversified equity funds, large-cap funds, or mid-cap funds.
However, as retirement planning is a long-term goal, young parents may also want to consider investing in debt-oriented mutual funds like debt funds or fixed maturity plans (FMPs). These funds invest in fixed-income securities like government bonds, corporate bonds, and money market instruments, which are considered less risky and offer stable returns over the long term.
Additionally, specialised products like National Pension System (NPS) and Retirement Funds offer retirement-focused plans that provide tax benefits and other features tailored for retirement planning. It’s important to note that retirement planning requires careful consideration of one’s financial goals, risk tolerance, and investment horizon. Young parents should do their research, consult with a financial advisor or professional, and create a diversified portfolio that aligns with their retirement goals.
- Building an emergency fund:
For young parents, building an emergency fund is especially important as unexpected expenses or emergencies can be particularly challenging with the added responsibility of caring for children.
They should consider, including childcare expenses in their emergency fund calculations, prioritize your emergency fund contributions as an essential expense, start small and build up gradually & revisit your emergency fund goals and adjust your contributions accordingly. Make sure your emergency fund keeps pace with your changing financial needs.
By prioritizing your emergency fund and staying committed to your savings plan, you can build a safety net that can provide peace of mind and financial security for you and your family.
For building an emergency fund, it’s recommended to invest in low-risk mutual funds such as debt funds or liquid funds. Debt funds invest in fixed-income securities like government bonds, corporate bonds, and money market instruments, which are considered less risky and offer stable returns over the short term. Liquid funds are a type of debt fund that invests in very short-term debt securities with a maturity of up to 91 days, making them highly liquid and low risk.
Investing in low-risk mutual funds can provide a balance between safety and returns, allowing your emergency fund to grow while also preserving your capital.
It’s also important to keep your emergency fund separate from your other investments and to have quick access to the funds in case of an emergency. Therefore, it may be best to invest in a direct plan of a debt fund or liquid fund that allows easy redemption with a low or no exit load.
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A mutual fund scheme is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the mutual fund or its AMC. Due to the nature of the underlying investments, the returns or the potential returns of a mutual fund product cannot be guaranteed. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. Investors should consult their financial advisers if in doubt about whether the product/scheme is suitable for them.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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