Soaring costs of schooling, funding your child’s higher education is a significant concern for parents today. Many of you may already be struggling with mortgage repayments, bills and living expenses, let alone your child’s higher education.
However, with the help of some careful planning, you can ensure you have enough saved up for yourself and children’s education. You can increase your financial worth and reach your goals by investing in a child education plan and making some smart choices now.
The earlier you begin investing towards the target corpus, the more time your money would have, to grow over time, and maximize benefits from the power of compounding.
How Much Do You Need To Invest?
Most parents commit the mistake of taking the actual cost of higher education as the corpus amount, without paying heed to the effect of inflation, which often results in accumulation of insufficient corpus. Over time, inflation reduces the purchasing power, implying that the future cost of a course would be higher than the current cost (after factoring in the inflation costs).
Calculate the estimated cost of your child’s higher education, including tuition fees, cost of travelling, living expenses and other miscellaneous expenses. With a well-timed start and proper financial planning, you can fund the cost through mutual fund SIPs. The more you delay investing in a child education plan, the higher would be the chances of either accumulating insufficient corpus or straining your finances in the process.
A child education plan is a long term process, which is why you should invest through instruments that provide inflation-beating returns. A long investment tenure allows you to take moderate levels of risk, which can potentially produce high long-term returns. Opt for high risk, high return investments such as SIPs in equity-oriented funds.
Here are a few steps you must follow to make an effective child education plan:
• Use the power of compounding
Availing higher education from a good educational institution can cost a fortune. So, you should try to build a substantial corpus for a child education plan.
As a parent, prepare for the reality that the cost of education over a decade from now would be far more expensive. Instead of relying on traditional investment tools such as FDs, you must explore investment options that help you compound your earnings to a great extent. Your aim should be to build a child education fund that is sufficient to meet your child’s future finances even when you are not around.
Plan a better education for your child by choosing a systematic investment route such as SIPs and avail benefits like compounding in your child education plan.
• Take Inflation Into Account
To protect your child education plan from being eroded, parents must factor in the rate of inflation. It will help you to plan the future of your child better. It will also keep them mentally and financially prepared for the forthcoming percussions of inflation on your corpus. By incorporating the best child education plan that cushions the blows of inflation, you can prevent your savings from eroding.
• Prioritize Your Goals
Financial planning for children is indispensable for securing a child education plan. But what adds on to its value is that it accounts for all their goals and prioritizes them in a practical order. Invest in high yielding schemes such as mutual funds with sip benefit, which have the potential to outperform other asset classes and are considered effective in building a corpus faster.
Drafting an effective child education plan requires knowledge and precision. It is not something you can compromise on. You can take expert financial help from reputable advisors such as FinEdge as they will help better allocate your assets to maximize the returns on your savings. So, ensure quality education for your child by making the right financial decisions.