Your Child Deserves the Very Best. Here's How You Can Save For Their Education

Why is Child Education Planning Important?
 

Day by day education is becoming a financial strain in India. Schooling costs have risen dramatically in the last decade^[1]. But that doesn't mean you should compromise on your child's education planning proper child education planning not only helps you stay ahead of inflation, but also ensures that financial constraints do not limit your child’s aspirations.
 

Benefits of Child Education Plans
 

Child education plans are tailored financial products designed to address education expenses systematically. These plans provide:
 

Milestone Payouts:
 

Funds are disbursed after the lock in period of 5 years, in some case partial withdrawal is also allowed basis insurance company terms and conditions.⁴
 

Tax Benefits:
 

Premiums paid are eligible for deductions under Section 80C (under old tax regime), and maturity benefits are tax-free under Section 10(10D).
 

Key Steps to Save for Your Child's Education
 

1. Estimate Future Education Costs
 

To start planning, calculate the cost of higher education based on your child’s potential career interests. For instance, tuition fees for engineering or medical studies in India differ from international programs. Consider inflation while estimating future costs. Besides it is not just the fees of schools colleges that have seen a rise, it is about all the other expenses that come with education. For example, private coaching, music books, school bus, all these expenses can add upto Rs.16-30 lakhs during a child's schooling
 

2. Set Financial Goals
 

Break down your financial goals into smaller milestones. This approach helps allocate resources effectively and track progress. Focus on:

• Tuition and accommodation costs
• Technology and book expenses
• Extracurricular requirements
   

3. Choose the Right Investment Tools
 

Several investment options are available for child education planning^[1]:
 

Mutual Funds:
 

Systematic Investment Plans (SIPs) in equity mutual funds offer returns over the long term. These are suitable for parents with a moderate to high risk appetite.
 

Sukanya Samriddhi Yojana:
 

If you have a girl child below the age of 10 this is the perfect time to invest in SSY. You can build a corpus for your girl child and avail some tax benefits.
 

Public Provident Fund (PPF):
 

With a government-backed interest rate, PPF assures tax free returns.
 

Child based Unit Linked Insurance Plans (ULIP):
 

Insurance cum savings plan offer protection and market-linked returns, making a reliable choice for long term goals.
 

Higher Education Savings Tips ^[3]
 

1. Start Early
 

The power of compounding works best when investments are made early. For example, starting to invest ₹5,000 per month in an equity fund offering 12% returns at your child’s birth can grow into ₹25 lakhs by the time they turn 18.
 

2. Diversify Investments
 

Allocate your savings across different instruments to minimize risks and maximize returns. Combine equity funds, insurance plans, and fixed-income options for a balanced portfolio.
 

3. Take Advantage of Tax Benefits
 

Under Section 80C of the Income Tax Act, investments like PPF, child education plans, and certain mutual funds qualify for deductions (under old tax regime), helping reduce your taxable income.
 

Choosing the Best Plan for Child Education^[4]
 

When selecting a savings or insurance plan for education, consider the following factors:
 

1. Flexibility:
 

Opt for a plan that allows withdrawals during critical milestones, such as higher secondary school or college admissions.
 

2. Insurance Coverage:
 

Child plans often include life coverage for the parent, ensuring financial stability even in unforeseen circumstances.
 

3. Returns vs. Risk:
 

Long-term investments typically favour higher returns. Analyse your risk tolerance and select a plan that aligns with your financial goals.
 

4. Cost of Premiums:
 

Calculate the affordability of premium payments while considering your monthly budget.
 

How to Plan for Overseas Education?
 

For parents planning to send their children abroad for studies, additional considerations include:

• Currency fluctuations
• Higher living costs
• International tax implications
   

Conclusion
 

Planning for your child’s education is an essential financial goal. By starting early, diversifying your investments, and leveraging tax benefits, you can secure your child’s future and provide them with the opportunities they deserve. With effective child education planning, your dreams for your child’s academic success can become a reality^.
 

Frequently Asked Questions
 

Q1: What is the ideal age to start saving for my child’s education?
 

A: The earlier, the better. Starting at your child’s birth gives your investments more time to grow.
 

Q2: How do I estimate the future cost of education?
 

A: Use an education cost calculator to factor in inflation and other related expenses.
 

Q3: Are child insurance plans mandatory?
 

A: While not mandatory, they combine life coverage with savings, making them a prudent choice for many families.
 

Q5: What tax benefits are available for child education planning?
 

A: Investments in PPF, child plans, and certain mutual funds are eligible for deductions under Section 80C, and higher education loan interest is deductible under Section 80E. ^[2]