Even though inflation has come down slightly, costs for the typical Indian household are increasing quickly. As you may know, higher education is already excessive and increasing by 10% to 12% annually. One of the biggest financial commitments that families must make is for their children’s education. Currently, a four-year engineering programme costs about Rs 6 lakh on an average. The basic cost is going to reach Rs 12 lakh in six years. An engineering degree will likely exceed Rs 24 lakh by 2027. It is time that parents consider saving adequately for their children’s future, and this article is the ultimate guide to the same.
Why should you invest in the higher education of your child?
Preparing for a child’s financial security in the future is a difficult endeavour. Many try to provide their children with a substantial financial safety net, but when the time comes, they discover that their saved money needs to be increased. Parents may purchase the best child investment plans available today to provide their children with a financial safety net. Making the right investing decisions at the right time is essential to safeguarding a child’s financial future. Creating a future financial plan entails, like all investments, assessing each need and the financial objectives that are intrinsic to a certain set of children and their parents.
Being an early bird can be helpful.
To begin saving early is one evident solution. Not only will the person be able to accumulate a larger corpus, but even the returns would also benefit from compounding. A corpus of Rs 1 crore can seem intimidating, but you can save this much with a SIP of Rs 9,000 over 18 years in an equities fund that offers a 15% return, to state an example though it depends on market risks and other factors.
In addition to producing a smaller corpus, a delayed start may put other financial objectives in danger. For example, if you start saving for your kids’ higher education when you’re in your 40s, you’ll probably fall short of what’s needed. Parents frequently use their retirement funds to bridge the gap, but doing so might compromise their life after retirement. ULIP investments are one of the options parents may consider for their kids since they enable insurance coverage throughout the parents’ working years while helping accumulate a lump sum higher education corpus for the future.
Here Are Some Of The Best Investment Options For The Higher Education Of Your Child
While some parents know the need to save money for their children’s future, they often lack a thorough understanding of what that fund should cover. Hence, even if parents, or just one parent, currently earn a wage sufficient to support their home and pay for the children’s current requirements, including their education, it may not be enough in the future. Therefore, the following schemes must be considered:
- “Sukanya Samriddhi Scheme”
An Indian government programme called Sukanya Samriddhi encourages parents to set aside money for their daughters. It is possible to start an account at any post office until your daughter reaches the age of 10. Every year, this scheme accepts minimum deposits of Rs. 1000 and maximum deposits of Rs. 1.5 lakh.
- Investing in gold
Once the markets are erratic, and against equity, gold always serves as the ideal hedge. Parents may consider investing in gold in the form of gold mutual funds, ETFs, or E-Gold. However, to lessen the risks involved with gold storage in physical form, experts advise against investing in it.
- Investing in Equity Mutual Funds
Deposits made to equity mutual funds are also worth considering. The availability of investment options and the extended time horizon of 10–15 years are the two key justifications for the same. Equity funds have historically produced annual returns of between 12% and 15%, though they are subject to high market risks.
- Recurring deposit investments
Recurring deposits are a good option for parents seeking a low-risk investment strategy for their children’s future because interest rates are currently inching upward. Therefore, locking the RDs allows you to make plans for your child’s future. In India, both banks and post offices provide recurring deposits. For instance, a monthly investment of Rs. 1000 can earn you Rs. 2 Lakhs after ten years.
- PPF investments
PPF, where it is possible to lock in the assets for 15 years, is a good option if you’re searching for a long-term investment strategy. The maximum annual investment amount is Rs. 1.5 lakh and the interest rate is fixed by the Government. Post offices and banks both offer PPF account opening services.
- NCS investments
The National Savings Certificate, or NSC, is a reliable way to set money aside for your child’s education. Five-year national saving certificates are available for purchase, and when they mature, they can be reinvested. One can purchase a certificate for as little as Rs. 100 at the current interest rate of 8.10%.
- ULIP investments
ULIP investments are perfect approaches for investors preferring comparatively lower risks. Several ULIP schemes can yield attractive returns in the future. This may be measured using a ULIP calculator. ULIPs offer life insurance coverage throughout the policy tenure and an opportunity to accumulate long-term wealth through investments in equity funds, debt funds, or a mix of the two types. They come with tax deductions on the premium amount of up to Rs. 1.5 lakh under Section 80C, and give you the opportunity to swap your funds at various junctures, depending on the market movements and your changing goals. Hence, this ensures comparatively lower risks overall. It is one of the best plans to save for your child’s higher education.
In conclusion, remember not to limit your investment to one plan. Instead, encourage your kids to set up savings for their objectives by teaching them about money management early in life. ULIPs can be a good way to start, and you can mix it up with any of the other investments mentioned above.