The best gift you can give your child is education. But it has become a costly gift now.
With tuition fees of prestigious institutions increasing by a minimum of 10% each year, it is only to be expected that in 10-15 years, you would have to shell out loads to meet your child’s education.
The skyrocketing fees is a wakeup call to all parents to start saving for a child education plan.
When to Start Saving?
With the rising level of fees, the best option when it comes to saving for education is to be an early bird.
Starting to save up early will amass a huge corpus, because of the power of compounding. Also, when you have a gap of 15-20 years to save, you would need to invest only a considerably small amount each month for your child education plan.
Factors to Consider Before Investing
Once you have decided on saving up, there are a few things you have to keep in mind before going for a child education plan:
- Think enough and understand the educational goals.
- Take into account how much you are willing to invest in a month.
- Asses the current financial scenario and arrive at the future requirements considering factors like inflation.
- Choose a child education plan that does not impact your other saving schemes like pension.
- Based upon the time frame available, go for the best education plan for your child.
Few Investment Options for Child Education Plan
Most of us would go for the various Insurance options provided by the popular banks to save for our kid’s future. While they are a good option and provide a safety for your child’s education, the fact is that they provide very less returns.
Apart from these, there are other great child education plans available that build a solid corpus:
- Sukanya Samriddhi Account: This is yet another lucrative investment option by Indian Government, but Sukanya Samriddhi Yojana is only available for a girl. It has an interest rate of 8.1 per cent.
- Gold Saving: This is the most popular option for a child education plan, but be sure to not go for physical gold. Instead gold ETFs would be a better option as there are no locker charges needed.
- Equity Mutual Funds: This is a good way to generate large corpus, but it has its own risks. There is no telling how the market would be like when you need the money in 15-20 years.
- Debt Mutual Funds: Some debt mutual funds offer better returns than bank deposits as they are more tax efficient. But when going for long term investment, keep in mind to opt for a safe child education plan more than anything else.
- PPF: This is the best child education plan for many reasons. It is a 15-year scheme. The 7.9 per cent interest rate makes it an attractive investment option to build a considerable corpus. Moreover, the interest earned is tax free.
Benefits of Starting Early Investing
If you start early, you need to invest less. It’s as simple as that.
For Instance, if you target for Rs25 lakhs, you can achieve the same in 15 years by just investing Rs5000 a month.
Below are few of the best long-term child education plans:
- For such long periods, equity funds is one of the preferred option as the high level of equity can counter the high rates of education inflation.
- You could also invest the rest in safer options like Public Provident Funds(PPF), tax-free bonds or even child education plans offered by insurance companies.
Options for Short Term Child Investment Plans
When you have a time horizon of less than 5 years, it is best to play it safe.
Few of the child education plan options available are:
- You would have to rely on fixed income instruments like Debt funds, Recurring deposits and Monthly Income Plans(MIPs).Dependent on how much a person invests, he can save up to Rs20 lakhs.
- You could also go for high returns, high risk, short-term investments like shares, but invest in them only if you’re sure of the returns.
Choosing the Best Child Education Plan
Most of the insurance companies offer an investment plan for your child’s future.
If you are not sure on which would be the best child education plan, follow the below steps which helps you on deciding:
- With the help of an online insurance aggregator, find out how much you need to invest.
- Use an online insurance aggregator to give you the list of available options based on the sum you want.
- Analyse them and shortlist a few.
- Read the terms and conditions. Also check the claim settlement ratio.
- Choose the best child education plan that suits you based on your research.
Most Importantly, Plan for the Future
Your child’s education needs or your financial status could change yearly. So it’s important to always keep reviewing your portfolio.
Whatever be your investment choice, it is imperative to save up on a child education plan to secure your kids life.