Investment Tips for Your Children's Education
Education plays a key role in shaping your children’s future. Education is of two types - the kind that happens in school and the kind that happens outside of it. To ensure that your children get the desired education, it is important to invest in the right child plan. Here are some tips that you can consider while investing in a child plan.
Importance of investment for child education
Today, children no longer restrict themselves to traditional career choices. Your children may want to become a chef, an artist, or a pilot, or may choose any career based on their interest. It is important for you to be financially prepared to provide your children with the desired education to be able to fulfil their dreams. The amount that you will require will largely depend on their career choice. The increase in costs of education1 due to inflation must also be taken into consideration while arriving at the final amount. Investing in the right child plan at the right time can help you grow your money to secure your children’s future.
Things to consider before investing for your children's education
Finding a suitable investment for your children’s education is crucial. So, make sure to keep the following things in mind before you start investing for your children’s education:
Inflation in the country
Education is a recurring, long-term expense. Over time, the cost of education is likely to risec. That is why it is important to account for inflation and build an education fund that provides inflation-beating returns while fulfilling your child's needs.
Tax deduction benefits
Certain investments qualify for tax* deductions under The Income Tax Act, 1961. These benefits can improve your overall returns. You can consider options that offer growth along with tax efficiency.
Invest in a plan that fits your requirements
Research the market for different types of plans that can offer you suitable returns to cover the costs of education. Look at the risk involved, the features offered, and the returns before choosing an education plan. Look for a plan that fits your budget and is also able to generate enough money for your children’s future needs
Invest early
The rate of inflation and the cost of education are on the rise. Given the rise in education costs, it is important for you to start investing in an appropriate plan as early as possible. Investing at an early age gives you more time to accumulate a larger amount that can benefit your children later
Monthly saving and budget
While securing your child's education is essential, it is also vital to ensure that your overall financial stability is not ignored. You need to factor education planning into your monthly savings and budget without compromising other essential needs and goals.
Review your existing investments
Before you invest in a child investment plan, look at other investments and assets that you might have in your portfolio. See how these assets can help you achieve your children’s education goals. Now try to analyse how much more you need to achieve your objective. You can then pick a child investment plan accordingly
Estimating the amount to save for your child's education:
Estimating the amount you need to save for your child’s education requires careful planning and involves lot of factors. Below are some of the factors that can help you plan well:
Calculate the monthly savings and spendings
Review your monthly budget and other financial commitments. Based on your household expenses and other financial priorities, you can set aside an amount that you can comfortably invest.
Determine the time required
Knowing when your child will need the funds, such as for school, graduation or postgraduation, can help you plan the amount of time you need to save for their needs.
Understand education costs
It is important to look at the current and future costs of education in the country as well as overseas. This includes tuition fees, books, accommodation, equipment and travel. These factors can offer you a clear picture of how much you need to save.
Rate of return
Make sure you know how much your investments are likely to earn over time. The higher the return, the better it can be to achieve your target. For instance, if you select an investment with a higher rate of return, you can reduce the monthly amount you need to set aside, and vice versa.
Determine the influence of inflation
Education costs rise over time due to inflation. Therefore, you must factor in inflation to avoid falling short of funds later. Look at the current rate of inflation and see how it impacts you in the future. Based on this, you can determine a suitable amount to save.
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