How to Start Planning for Your Child's Educational Needs?

Education is the greatest gift parents can give their children. But, with the ever-increasing cost of education, it is important to start planning early and choose investments that will reap benefits at the right time for you to fund the best education for your child. We know that private institutions charge three times the tuition fees that government institutions do. Plus, we need to take inflation into consideration while estimating educational costs at some point in the future.

So, some advance planning can prepare you financially to outpace inflation and sail through market volatility. Parents also do not have to compromise on the child’s dreams and aspirations. But starting off the process might be slightly overwhelming, especially if this is your first time. Here are a few simple but effective steps for a strong and successful child education plan.

Equity Funds in India

It is recommended to start early and look for long-term schemes. Equity funds are the perfect fit, especially if you allow ample time to beat market fluctuations. Parents do not have to be involved full time in the investment either. The fund is managed by experienced professionals, focused on ensuring the best possible returns for investors. The returns on ELSS are usually higher than other types of mutual funds. Further, the lock-in period is also lower at 3 years. Most importantly, with ELSS, you can get tax benefits too.

Systematic Investment Plan (SIP)

If you are unable to invest a lump sum amount in equity fund, consider an SIP mutual fund. Here, you can start with as little as ₹500 and invest regularly, weekly, monthly, quarterly or annually. You can choose to increase the investment amount as and when you are able to. It helps in wealth accumulation over the long term through the power of compounding. It basically works on the concept of “drop by drop is the water pot filled.” Investors can pick their preferred interval and the amount will be automatically deducted from their bank account.

Insurance Policies

In case of your unfortunate and unexpected demise, life insurance can help your family remain financially secure. The death benefits can be used for any financial need, including your child’s education. In fact, this can help the next generation fulfil their dreams without having to deal with cash crunches. One smart approach would be to look for plans that offer the opportunity to create wealth as well and provide risk adjusted returns.

Successful Planning

India today offers multiple unconventional courses that your child might want to take up. For example, carpet technology, public health entomology, ethical hacking, bachelors of rural science, spa management and art restoration are becoming popular. So, make sure to understand the basic cost of such courses to make an informed start. In fact, this can also help you know how much to invest per month to reach the desired amount.

Funding your child’s education requires good portfolio management and knowledge of the nitty-gritties, ELSS tax benefits and interest rates. Further, keep inflation in mind to make an accurate estimate of the corpus you might require in future.

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