Step-By-Step Approach To Plan Your Child's Marriage Needs
“Cant keep calm I am the mother of the Bride”, says Mrs Gala. Shruti is the only child of Mr & Mrs Gala.
She is getting married to her childhood friend, Raj in December. And Shruti being the only child, her parents have big plans for her wedding.
Every parent wants to make the wedding of their child one of the most memorable occasions of his / her life.
Weddings are in fact considered to be synonyms with fun-filled, colourful and musical events.
But along with all of this, another important thing attached to weddings is "expenses".
And in order to fulfil these desires, it is imperative that you follow the right approach towards planning for your finances
Having a practical approach to all wedding related expenditure is necessary and that will enable you and your family to live a stress free financial life.
Step 1: Start Early
While planning for your child's needs, it always pays to start early. This is because if you start saving and invest early, it will give you a larger time horizon to meet the goal and even build a bigger corpus.
Remember the old adage, “Rome wasn’t built in a day.”
Therefore, to accomplish the dream of getting your child married begin saving and investing early —perhaps when he/she is a toddler.
Starting early has a variety of benefits:
✔ Permits you to take a relatively higher risk and invest in equity mutual funds and benefit from potentially higher returns in the long run
✔ Helps to benefit from the power of compounding; and
✔ Allows you to contribute smaller amounts regularly over longer periods
Step 2: Rationally Estimate Wedding Expenses
Don't be carried away by societal pressures or affluent friends or neighbours. Remember, each one's personal finances are unique. There's also no need to ape others blindly, as each one's financial circumstances/situations are different.
Therefore, focus on YOUR budget as there are other vital financial goals to fulfil as well like your child's education and your own retirement, among a host of others.
While estimating the wedding expenses, take into account the present value i.e. the amount you would have spent today on your child's wedding on a rational basis. Extrapolate the future value considering inflation and the time horizon before the goal befalls.
Then work out the periodic monthly investments you need to save in mutual funds via Systematic Investment Plans or SIPs. Keep in mind that the earlier you start this exercise, the lesser you would have to set aside and invest per month to accomplish this financial goal.
Step 3: Follow An Asset Allocation That Best Suits You It is important to build a portfolio on the basis of your asset allocation. An ideal asset allocation is decided on the basis of various factors such as your age, income, risk appetite, risk tolerance, nearness to goal and so on.
A well-defined asset allocation is capable of dealing with different market conditions and helps you reach your goals in a systematic manner.
Step 4: Invest Smartly To Build The Corpus Mere savings won't be enough. Hence, you should invest in mutual funds via Systematic Investment Plan (SIP).
With SIP you inculcate the habit of regular savings. You systematically invest in funds over a period of time and eventually a corpus of huge amount is built.
Investing in equity mutual fund schemes may prove rewarding if time horizon for marriage is more than 5 years.
Step 5: Get Insured Optimally As parents ensure that you are optimally insured for life. The demise of the breadwinner of the family causes a BIG setback to your dream of providing the best to your children. Therefore, as parents, ensure that you are adequately insured.
Use our Human Life Value Calculator to know the adequate insurance cover for you and your family.
Pure term life insurance plans may be considered to indemnify risk to life for the cost-to-benefit they offer.
Likewise, optimally insure for health, as not having an adequate medi-claim cover or not having one altogether, can potentially derail your financial goals if medical emergencies arise.
Step 6: Avoid Creating Any Debt Agreed, weddings are once in a life time occasions and you want all arrangements to be perfect.
But PersonalFN is of the view that, if you take a sizeable amount of debt for that one event of life which is going to take you years to repay, then you will be severely hurting your financial health. And even if you have to take some loan, make sure that you take only that much which is extremely necessary.
You see, it is imperative for us to realise that although marriage is the happiest moments of our lives, the cost associated with it can create it a sour memory if not dealt with care.
Many parents are burdened under the societal pressure and expectations and compelled to go beyond their means.
And in this bargain, they drain out most of their financial resources or worse even take loans. You need to understand that if you land up knee deep in debt by one of your children's wedding, then you are not only bidding a goodbye to most of your financial goals but also depriving your other child of the basic needs of life.
Some things which a necessity to few are luxury to others. It is for you to decide what are your "need to have" things and what things can be "easily avoided". Once you have determined this, cutting down on extravagant costs will not be a difficult task.
Adopt a practical approach to all wedding related expenditure. For instance, if the means are limited, consider choosing an affordable venue, compromise on décor, limit the guest list; among others.
The last thing you should do is use credit cards or wedding loans for any large wedding expenses. It's best to avoid borrowing for a wedding. We will talk about wedding loans in detail in the latter part of the guide.
Instead, only use those funds you have accumulated via financial planning for this goal of your child's marriage.
Hence, it is important to not get carried away with emotions and plan your finances in advance.
There are several ways to make wedding of your children the most treasured memories of your life.
Hence, determine a practical and realistic amount that you would need for your child's wedding. Once an amount has been decided, determine the future value of this amount (taking into account rise in costs etc.) and begin saving for your goal.
Remember that, the earlier you start saving and investing for your child's wedding the lesser you will need to set aside per month to achieve your objective.