A Comprehensive Guide to Planning for Your Child’s Education

Setting the goals^[1]

Like any other investment, keeping funds aside for the child’s education may be easier when you have the clarity of the goals ahead. Starting with enrolling your kid in a good school, think of the tentative choices like graduation and post-graduation courses, overseas education plans, professional courses, etc. Child education planning is crucial as it may help you have an approximate idea of costs, make a budget, and start with investments accordingly. Later the funding requirement can always be modified if your child has other plans in the future.

Chalking the plan^[1]

Once you have the guideline on how to plan for the child’s education, it’s time for action. Assess your financial situation to gauge how much investments you can afford or how big a risk you’re willing to take. A financial advisor can make you a customized plan based on your financial status, affordability, risk tolerance, and risk appetite.

Starting early^[2]

No matter how you like to go about your child education planning, starting early will benefit you more. Whether you choose traditional savings, PPF accounts, guaranteed* return investment opportunities, like non-market linked insurances or capital guarantee solutions, or seek to grow your wealth through market-linked financial instruments, the earlier you start, the longer your time horizon. Hence, the compounding works longer, leading to bigger accumulation of funds and higher returns.

Building a sufficient corpus^[2]

The prime part of the child education planning is creating a corpus that stands the test of time. This is because, when you start, you don’t have a clue about how your child’s future will shape or how the costs of education will escalate. It may be worthy to go for investment choices that can beat the future inflation. While traditional savings and life insurances are always the safest choices, you can try out options like mutual funds through systematic investment plans (SIPs), child plans, or unit-linked insurance plans (ULIPs) for both insurance and investment, which may be fruitful in growing the wealth further.

Tracing alternative investment paths^[2]

The alternative investment funds (AIF) have been showing impressive growth rates over the last few years. Riding on the success story of 36% year-on-year growth as per records of the Securities and Exchange Board of India (SEBI), alternative investment funds like real estate, debt funds, or housing private equity may also help in accumulating funds. Thus, this asset class can also be a potential entry in your child education planning.

Now that you know how to plan for child education, let your dreams start rolling towards financial reality!

FAQs

1. How to plan for your child’s education?
 

Child education planning involves four key steps:

• Set the targets.
• Make your personalized plan.
• Build a fund sufficient to cover future inflation through savings and investment choices.
• Start early to benefit the most from the power of compounding.

2. Which is the best investment plan for child education?

There’s no specific plan that can be termed the best investment plan for child education for anyone and everyone. Choices are aplenty, offering various returns and benefits. Every parent needs to pick the best investment options based on their chosen goals and financial situation.

3. What do parents mostly invest in?

Parents understand better the value of education and how it can shape their children’s future. Thus, they mostly prefer to invest in the good quality education of the children. 

4. How to secure a child’s future?

To secure a child’s future, a parent may rely on long-term investment plans that would yield generous funds with  returns. This money can be spent on creating a good academic journey for the child.

5. Why do you need child education planning?

Child education planning helps save money for future goals. Education choices can evolve as your child grows up, and the cost of education is likely to rise as well. Hence, having a tentative yet strategic plan in place, accumulating funds for the future may be easier.

6. What are the options for investment for child education?

You can choose to  save or invest your money through ways that are likely to beat  inflation. Child plans, mutual funds ( via SIPs), and ULIPs that carry benefits of an insurance and long-term investment subject to market risk may be possible choices that grow your wealth through returns in the long term^[2].

7. How can you gain more from child education planning?

Like any other investment, child education planning also needs you to start early. The earlier you start, the longer the power of compounding works. Thus, you are able to accumulate a bigger fund. 

8. What is the full form of SIP?

The full form of SIP is Systematic Investment Plan.
 

9. How can a child plan help?

A child plan^[3] is designed to cater to specific goals like the child’s education or marriage. It is a combination of insurance and market-linked investment; it may help you build a corpus over a long period of time and financially secure the child’s future.

10. What are the 5 stages of education planning?
 

The five stages of education planning are:

• Pre-primary
• Primary
• Middle
• Secondary
• Higher Secondary