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How to Build & Plan Funds for a Child’s Higher Education?

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A child is someone that completes the family & brings happiness to the family. As parents, we are protective of our children & want to give them the finest facilities in life. You do everything in your power to help them, from fulfilling their smallest requests to providing them with the best. With inflation at its peak, the cost of higher education plan for children at universities/colleges is skyrocketing. Having a higher child education plan solves the future financial crunch.

There is a saying that, “it is best to start investing earlier in smaller increments, rather than investing big increments at a later stage”-Aya Laraya. 

This should be your focus, don’t wait for your child to be 18 years old to start accumulating money for his education.

Start investment planning as early as possible. Think of it as when your child turns 18 then you only have 1 year to accumulate wealth. However, early investment when your child turns 2-3 years old gives you 15-16 years to accumulate wealth for their education. Now since you seem interested in a child education plan, learn how to build & plan funds for your child’s higher education.

Prepare a monthly liabilities plan

The foremost step before going for any investment or financial product is to prepare a budget for monthly liabilities. From the traditional courses, many upcoming new courses are rising. So the variety of courses is rising but so are their costs.

For a few basic courses, you can figure out the estimated costs today. Considering the inflation, you can get an idea of the desired cost you would need in the future. Select the tenure when your child would require the money. Once the requirement is estimated then figure out how much you need to keep aside monthly for this goal.

The earlier you start the more benefits you reap

A child’s higher education is a long-term plan, thus, planning for it when your child is 1-2 years old will do wonders for your investment. Now consider that you are 30 years old & you are a software developer, blessed with a baby boy. You have started investing 15,000 in your child’s higher education. The courses you had in mind are engineering & MBA, however, these might change in the future, but it’s a good thought to start planning by keeping a course in mind.

Today the cost of a reputed college for engineering is somewhere around 7lakhs. Considering the inflation rate by the time your child turns 18, the same degree might reach up to 90lakhs -1cr. On short notice how will you arrange this amount? This is where early investment becomes your rescuer. Additionally, the power of compounding for a long-term investment plays a crucial role.

Investment Options to fulfill your child’s needs

1. MUTUAL FUNDS For a long-term financial investment like this diversified equity, mutual fund investment becomes the ruler. Equity investment comes with risk but with high returns too. Start an early SIP under the mixture of large-cap & mid-cap funds too. Make a diversified investment to minimize the risk.  The main agenda behind going for a long tenure is to gain the benefit of the power of compounding

 2. PPF for your child’s needs Another investment option to consider for your child’s needs is opening a PPF account under his name. A PPF account will help you to create a tax-free corpus for your child for 15 straight years. After the 6th or 7th year, if your child requires financial assistance, a partial withdrawal can be made. Once your child becomes an adult, they can too make contributions to the PPF account & extend the same account.

3. ULIP plans for your child Staying invested in a child ULIP plan reaps many optimum benefits for you as parents. You get a premium waiver feature to ensure that the child gets the required amount at the desired age. You need to have adequate life insurance so that if god forbid something happens to you, your child will continue to have financial support. Even after you, your child’s needs will not be derailed. 

Bottom Line:

Planning is the golden rule for living life, especially when there are finances involved. Inflation is rising yearly & so is the cost of minor to major things. The cost of education is quite high at this particular time, imagine the cost after 10-20 years! Planning is what is needed to prepare for such costs!