From the moment your child is born, it's crucial to start planning for their financial future. Alongside the joy and celebrations, you need to think about their education and future wedding. While investing in education is a common long-term commitment, planning for the wedding can also be significant. Weddings can be expensive influenced by societal expectations. Naturally, you want the best for your child on their special day.
There are calculators to help you estimate the amount needed for the wedding, but they might be too basic. Your financial plan should consider three key things: the rising costs of weddings, the desire to make a statement in society, and ensuring a secure future for your child before and after the wedding.
In fact, there are various factors upon which your child’s marriage budget depends:
Current Estimated Wedding Expense: The immediate cost estimation for the wedding is a crucial factor. This includes expenses related to venue, catering, clothing, and other essential elements.
Number Of Children: The number of children you have can significantly impact your overall financial planning. Each child's wedding will be a separate financial commitment, so it's essential to consider this in your long-term strategy.
Future Value Of Current Expense: Considering inflation and the rising costs of goods and services, it's important to factor in the future value of the current estimated wedding expense. This helps in adjusting the budget for the impact of inflation over time.
Systematic Investment Plan (SIP): Implementing a Systematic Investment Plan (SIP) is a valuable financial tool for planning for future expenses, including weddings. Regular investments in SIPs can help build a corpus over time to meet specific financial goals.
These financial factors highlight the need for a dynamic and forward-looking approach to budgeting for your child's wedding in India. Incorporating tools like SIPs and accounting for future expenses can contribute to a more robust and adaptive financial plan.
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The grand Indian wedding is a widely celebrated occasion in India, and interestingly, different regions place varying importance on the event. In the North, weddings are marked by grandeur, with elaborate planning extending from event organizers to mehendi, roka, and engagement ceremonies. Consequently, pre-wedding preparations come with a significant cost, and in today's value, weddings in the North often exceed Rs 50 lakh. In the South, the allocated budget for weddings typically ranges between Rs 20-30 lakh.
“Some parents prioritize education and their own retirement, ensuring these goals are met before allocating funds for weddings. Following discussions about pre-event and event requirements, considering the goal's priority among other financial objectives, as well as ceremonial and ancillary expenses, we establish a budget for weddings. Subsequently, we calculate the Future Value of this budget and assist clients in investing smaller amounts from the current year to the goal year to meet their targets,” explains Dilshad Billimoria, a Sebi RIA and managing director and principal officer, Dilzer Consultants, a financial planning firm:
“Wedding goals, especially in the North, are sometimes planned extravagantly. As advisors, our responsibility is to guide clients in allocating their investments wisely, aligning with the priority of their goals,” she adds.
According to another financial advisor, consider investing with a flexible time frame in mind, as predicting the exact date of the marriage in advance can be challenging. It's advisable to plan for a range of time frames, such as eight-12 years, rather than specifying an exact period. When estimating costs, assess the current expenses associated with the type of wedding or wedding functions you envision. This approach ensures a more accurate estimation, avoiding the pitfalls of using rounded figures that might lead to significant underestimation or overestimation.
“Be aware that costs can vary significantly; for instance, a destination wedding may incur different expenses than one held at your current location. Seek insights from parents who have recently organized their children's weddings for valuable information. Once you have total cost estimates, apply an inflation rate to gauge the future amount required. Importantly, maintain a balance between wedding expenses and other financial goals, preventing compromises on retirement or other objectives. Avoid resorting to loans for the wedding goal,” says Vishal Dhawan, the CEO and founder of Plan Ahead Wealth Advisor, a Sebi RIA.
“Given the eight-year horizon, consider an initially aggressive investment approach. Explore options like flexicap equity funds, index funds, or aggressive hybrid funds in the initial years. After the first three to five years, gradually transition the funds to debt instruments to mitigate risk. Implement a Systematic Investment Plan (SIP) at the outset for the benefit of rupee cost averaging,” Dhawan adds.
According to Suresh Sadagopan, founder and principal of Ladder7 Financial Advisories, first, you need to estimate what will be the cost of the wedding if conducted today. “Estimate the inflation during the period - say seven per cent. After ten years, what it will cost will then be known. Some resources will already be earmarked for the goal, and we need to extrapolate as to what it will grow to in ten years. For the gap in funding, we need to start monthly investments from now on,” he adds.
Your comprehensive financial planning, encompassing your child's future and marriage investment plans, must include a robust insurance component. The continuity of your SIP for your child's future shouldn't be disrupted in the unfortunate event of a calamity. Therefore, your insurance coverage should be structured to ensure that long-term savings persist even in your absence. Various insurance companies provide plans that cater to this need, and it's advisable to review them.
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Additionally, your plan should integrate a consistent annuity flow for your child post-marriage, fostering security and continuity within your financial strategy. The incorporation of a regular annuity flow for your child after their marriage is a pivotal consideration in shaping your financial plan. This step contributes significantly to establishing financial security and maintaining a cohesive overall approach. To facilitate this planning, leveraging a gratuity calculator proves beneficial, offering precise calculations and projections for a well-rounded approach to your financial goals. Therefore, you need to strategically and patiently build a corpus good enough, with the right amount of assets and insurance, to make your child’s marriage a grand success.