Investment Planning – Based on Time Frame

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15 YEARS TO GO

  • If you have 15 years in your hands, you can plan more effectively. You can choose a combination of aggressive and conservative funds. The ratio of equity (aggressive) to the Debt (conservative) should be 3; 1. In other words – if, you have $1,000 for investment, then you should put $750 in equity and $250 in debt funds.
  • You should not consider keeping the money in the bank account, as the rate of return given by most banks – can never beat inflation. The basic idea behind this is – if, you have more time in hand, then you should focus on high risk funds that give you high returns, but when deadlines for the admission approaches nearer, you are advised to transfer all the funds to a secured debt fund that gives fixed returns.

You must use the time frame to your advantage, and focus on getting maximum returns. Hence, a smart investment will help you secure the future of your children.

10 YEARS TO GO

Ten years of time is enough to build a good amount of money. Saving a good amount of money during the initial years will help you earn more interest.

You can build a 70 -30 ratio between equity and debts. 70 percent can give you fluctuating yet aggressive returns, whereas the return on rest 30 percent will be guaranteed and free from risks.

As the time for the admissions approaches – you can shift the entire money into debt funds.

5 YEARS TO GO

You must be wondering –What can be done in a span of just 5 years?

Well, 5 years is still a lot of time to plan your savings. You can still afford to invest aggressively, but your investment should be divided in the ratio 50-30-20, i.e. 50 percent of your money should be in equity, 30 percent should be invested in the debt funds that give fixed returns, and 20 percent must be kept in liquid accounts.

Suppose, you have received inheritances, promotions, salary hikes or made investments that take you away from the financial aid- you can consider moving the money in your child’s name.

You should make best use of the 5 years by encouraging your child to improve grades, this will increase his/her chances of getting financial aid.

2 YEARS TO GO

If, you have 2 years of time – You must avoid investing in high risk funds like stocks and mutual funds (equity). You must try to save as much as possible and make your child understand the importance of these 2 years. Along with your investments; your child’s academic performance will greatly help in reducing the cost of education.

A better GPA might save your child a thousand dollars. Similarly, a good score in the SAT examinations will be helpful. For every 10-point rise in the SAT score; thousands of dollars will be saved. As per the research, coaching your child can help your child raise hundreds of points. Hence, consider admitting your child into the coaching institutions.

Effective planning will ensure that, you save a lot of money, yet fulfil your dreams of getting your kid admitted into the top educational institutions of the United States.

DIVERSIFY YOUR INVESTMENTS
Your Child’s education is undoubtedly important, but you must consider diversifying your savings and investments. You should maintain a proper ratio of equity, debt, bonds, debentures, etc. This will help you to balance the risk and get better returns, and will ultimately help during your child’s education.

MANAGE CAREFULLY

While deciding on your affordability; colleges consider the previous year tax year (January-1 to December-31). You have one year to adjust the tax, by consulting a financial expert. You can do so, by showing less income, or assets. You can move your assets, or take bonuses before the year begins. During the base year (the year which is considered by the college to determine your estimated family contribution), you can make expenditures, or you can also consider making investments on your retirement plans, that will convert your assets into liabilities.

Proper planning and knowledge of the financial aspects will greatly help you to save money, and secure your position during the all-important admissions.
The segment “Investment Planning – Based on Time Frame” is really beneficial as it gives you effective tips on investments, helps to get tax free returns and provides you deep insights on various ways to reduce your Estimated Family Contributions.

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