We do start children’s marriage planning by buying gold in physical form and keeping money in fixed deposits. These are traditional methods to save.
Lets see the pros and cons on planning through traditional methods.
1) Buying gold in physical form- We keep on buying small quantities of Gold usually in the form of jewellery .This accumulated gold at her age of marriage is exchanged back for latest design jewellery sets where jewelers actually deduct a hefty amt and we end up paying making charges twice on the same quantity of gold.
Instead of that buying paper gold .Through Demat or mutual fund gold schemes in pure gold fund.The price fluctuation will give you benefit.
Let us consider the following case study to understand this thing better in simpler terms.
MANOJ has an 8 year old daughter Priya. Manoj needs to accumulate funds for his daughter’s marriage. The marriage is planned 16 years from now.
According to Manoj, as on today, Priya’s marriage will cost Rs 15 lacs. If inflation (rise in costs) of 10% is assumed the same marriage will cost Rs 69 lacs after 16 years.
If Manoj wants to make a one time investment which will give him Rs 69 lacs on maturity after 16 years, he will have to make a lumpsum investment of Rs 13.19 lacs (assuming the investment earns a return of 12% p.a.).