Plan your finance and invest early for your Child's Education.

Yesterday I was talking with Amit, one of my batch mate in college. And he is planning for her daughter's marriage. But I was so surprised that Amit such a young guy in his early thirties started thinking about his daughter's marriage so early ! I mean her daughter Sneha is only 2 years of age. So, I asked him what is his financial plan ? And what is his timeframe for marriage of her daughter? He replied, at least 23 - 24 years from now, and obviously until she completes her higher studies. I thought wow ! This is a perfect example of planning early and avoiding any unwanted financial crisis for her daughter's future. That's really great.

So, I was curious to know what  is Amit's financial planning for her daughter's graduation or Masters, as these higher education cost will be a substantial amount in coming years. And again I was surprised, to know that Amit did not really plan for it. But we can all understand that these are the milestones her daughter will pass through much earlier. Say, for college entry-level education, it is only 15 - 16 years away. And I think Amit needs a full proof financial planning for these education milestones of her daughter as well. It's a very normal mind-set of middle or upper middle class people, to set aside fund for their daughter's marriage. And without hurting that sentiment, what I will say is to create a fund for your child's higher education from the very beginning. The money you may accumulate every month or every year might be very small at the beginning. But with the power of compounding this amount can grow up to a very substantial value after 10 or 15 years from the day you start investing the small amount.

So, the biggest advantage we can get with early financial planning is time. "Time" is the important most factor in any investment. You might have liquid cash to invest or you might have access to good investment instrument at a given time. But you need to plan your finance before hand to get maximize out of your money or investment.

Let's look at a simple example given below to get an idea of power of compounding with time.

In both these cases you have invested the same amount of money. In first case 2000 Rs P.M. for 15 years which yields you a corpus of 6,93,413 Rs. Where as in second case 4000 Rs P.M. for 7.5 Years yields you a corpus of 4,93,293 Rs. So, though the amount invested in both the scenarios are same, it is very much evident that with time, the same amount can generate a much higher end corpus for you.

And that's why we say, "Time is Money !"

Power of compounding increases with time.

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