Answer to Question #143352 in Financial Math for Ka

Question

Raj Shah, aged 36 years, is employed with a MNC. His wife Pooja, aged 34 years, is also working part - time. The couple has two children - daughter Rima aged 7 years and son Ansh aged 4 years. Raj and Pooja require your help to make a few financial decisions. (You can make any assumptions to further build up your case)

a. Raj and Pooja want to invest for their children’s higher education for the long term (over 12 to 15 years). Develop a plan so that they can accumulate a sufficient education corpus. 

b. Raj wants to take a Life Insurance cover of Rs 1.5 crore. Advise him whether he should go for a ULIP or a term insurance.

Answer 1

a. Raj and Pooja can start to save for the future of their children. They can invest in mutual funds or stocks since can accumulate over time. Before the children start to attend school the couple will have invested enough capital.

b. The couple should go for a ULIP insurance. In this insurance scheme Raj and Pooja will benefit from tax relief while they can switch funds free of charge to maximize their returns. The insurance is long term therefore will help the couple in generating income for the children in case the parents die.