Education in India is getting super expensive year by year. A child’s education plays a vital role in planning financial goals for the parents. As per the statistics (Source: http://mospi.nic.in/sites/default/files/publication_reports/nss_rep_575.pdf), from the year 2008 to 2014, the cost of education has increased three times. The cost saw a whopping increase of 226% for the primary school’s education and it is 157% for the upper primary as per the NSS report (Source- http://mospi.nic.in/sites/default/files/publication_reports/nss_rep_575.pdf). As per the Associated Chambers of Commerce & Industry of India (Source: https://www.assocham.org/newsdetail.php?id=4960) in the year 2015, the private school expense saw a huge hike of 150 per cent. The amount was increased to INR1,25000 from INR55000. Every category saw a hike that includes activity fees, uniforms, development fees, tuition fees, etc.
Most parents start saving for a child’s education from their initial years, but not all types of saving yield the best results. Sometimes, you cannot achieve the target amount within the expected deadline. Hence, it is extremely difficult for parents to afford quality education without proper financial planning.
Here are the investment steps you should follow to take care of your child’s Education:
It is always better to start saving as early as possible, maybe when your child is a new-born. By the time a child turns 18 years old, you will have enough money to plan their higher education. Having the right sized fund can safeguard your child’s future by covering the educational expenses. There is also an option to rely on loans but it is not a safer choice because interest piles up a lot.
Plan Your Time Horizon
You need to calculate the years of your child’s graduation and post-graduation. With the rough number of years in mind, you can plan the time horizon. The longer the time horizon, the better it is for you to plan and invest. But do not wait till the last hour. After saving a good amount of money, you can invest and watch your money grow.
Find Out The Estimated Cost Of Education
It is no secret that tuition and other educational costs keep rising from year to year according to inflation. Cost varies depending on the degree you pursue and the situations you are in, therefore the best a college can offer is an estimate of the cost of education.
It is important to keep an account of how much you have saved now and how much you have to save in the future. Once you save a good amount of money, you can opt for a SIP in mutual funds, recurring deposits, or can also consider a fixed deposit with a bank. Calculate now through L&T Child’s Education Calculator and manage money for your child in the best possible way.
Investment Options For Parents:
a) Recurring Deposit:
Recurring deposits, also known as RD which allow you to make regular deposits and earn attractive interests on them. You can choose the period of the deposits and even the amount to be deposited regularly. You can also choose the tenure of your savings as well, which can range from 6 months to 10 years.
b) Public Provident Fund (PPF)
If you are looking for a long-term investment plan, then you can consider PPF for your child’s education expenses. PPF The minimum amount needed to open a PPF account is Rs.500 where the funds can be locked in for a period of 15 years. PPF accounts can be opened via Post offices or banks.
Parents can invest in gold along with purchasing physical gold. The best option would be to invest in the gold ETFs because there is no locker and other storage charges. Also, you can invest in the electronic form and there is no worry of theft.
d) Mutual Funds
Cost of education increases over time, hypothetically, if the current fee is INR 20 lakhs, expect the fees to go high as INR 39 lakhs after 10 years considering an estimated inflation rate of about 10%. The simplified management of mutual funds makes understanding the investment hassle-free. The overall cost is low and it is the ideal choice to invest in your child’s future education. SIP can help you reach your target with some mutual funds giving a great rate of returns in 10 years or so. Give the best to your child for an excellent future. Use the L&T SIP calculator to calculate future value at various rates of return.
There would be a huge difference between the current cost of education and future cost, hence always be clear with the investment and saving plans. Choose the best which suits your pocket and also reaps long term benefit. Always have the habit of reading the scheme related documents before investing to understand the scheme type, investment patterns, and the risk factors associated with particular investments, and consult your financial advisor to understand the implication of any investment.
Disclaimer: This information is for general information only and does not have regard to the particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax, and financial advisors before investing. The recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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