It’s rightly said that only Education is the tool that can build, transform or secure a better life. That’s why parents today are more concerned about their child’s education. There has been a significant increase in the cost of higher education in India. Over the years the inflation rate of primary and secondary education has increased by 12% while for the higher education, it has been between 16%-20% !.
So if you are already a parent or planning to be a parent, then it’s necessary for you to save wisely and invest from today for your child’s higher education so that you don’t need to worry when your child grows up. Here are some ways to invest and plan your child’s education.
A parent should start with a SIP in the name of the child. SIP stands for Systematic Investment Plan. It’s the best way to invest in mutual funds since it has value investing in both bear and bull markets. It is actually a method that investors choose when they invest a fixed sum every month on pre-selected date in a mutual fund scheme or pre-defined period. It should ideally be aligned with the number of years to reach the goal. It not only reflects the broader aspects of economy but also its compounding helps to get higher returns.
So start with SIP with lock-in option in your child’s name.
Children Gift Plan
There are a few schemes that a parent can use as a gift to secure his/her child education. They invest the corpus in equity oriented investments and hence are subject to intermittent market volatility. So it’s for those who are confident on markets and the fund’s performance, only those can go for bulk investment.
They come with ‘lock-in’ or without ‘lock-in’ options. Ideally the lock-in period would be the time when the child attains 18 years or 3 years from allotment, whichever is later.
It’s the investment which is subject to least market risk. You can invest a certain sum of money yearly or monthly for a fixed number of years. It’s best to start investing when your child is born, in his/her name and keep investing till he/she attains 18 years of age. The interest rates are as high as 7%-11% and keep on varying.
Suppose you start investing 1 lakh yearly and keep on investing the same every year in your child’s name, till your child attains 18 years of age, then you would get app. 20 lakhs after 18 years and that’s a good sum for education.
So, it is the safest way to invest and get high profit on an amount for your child’s future.
Other Investment Options
Schemes such as ‘Children’, ‘Young Citizens’ etc are also useful in planning your child’s education. The parents who are planning for their child’s education in India or abroad, with a desire to get better results, they can also go for Multicap fund or thematic schemes. But one needs to be risk-taking for the same.
It is suggested for them to move gradually into a balanced fund or fixed income schemes once they are closer to their goal attaining period.
• Avoid delay in investment. Delay impacts the maturity, compounding and capital appreciation. So, start early to live a tension free life and secure your child’s education.
• Set aside a certain sum every month in your child’s name.
• Always consider the inflation rate of education sector, before investing in any scheme.
• Never make conservative estimate of cost of your child’s education.
• Learn about asset classes and their suitability.
• Invest in a scheme wisely and carefully.
• Involve your child in saving planning.
• Those parents who want to send their child abroad should calculate probable future cost of accommodation, living expenses, keeping in mind the currency exchange rate.
• Start with SIPs with lock-in option to achieve the goal.
These were some ways in which parents can invest in his/her child’s education and live the upcoming phases smoothly and tension free.
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