When it comes to your child’s education compromise is always off the table. Everyone wishes to provide their children with the best in class education and opportunities for a better future and financial independence. As a parent, you need proper financial planning which will take care of your child’s education, their marriage, and your retirement. You also need to prepare yourself for unforeseen medical emergencies. However, education these days has become expensive and higher studies can cost a fortune. So if you want your child to get the best education you need to consider to start investing in a best child education plan.
The cost of education in India has gone higher as compared to what it was a decade ago. So the question here to answer is how much money you need for your child's education today? As the education cost was relatively less expensive a decade ago, the cost in 10 years from now will also change. So before you begin investing in child education plan in India you need to approximately calculate how much money you will need in the future.
If you consider today's cost of an MBA degree from an IIM it is almost 19 lakhs, the same cost was Rs 4.5 lakhs a decade ago. This means the cost rose by almost 12% increase annually in the last 10 years. If you consider the cost of engineering college fees has increased from Rs 3.6 lakhs to Rs 10 lakhs which means a 10% increase every year. Also, the fees of medical colleges increased by 10% every year. So whenever you start investing consider this rise in fees and other academic expenses as well. Before you start an investment plan for your child’s education you need to consider two important factors. These factors are how much corpus you will need to save and how much time you have to build this corpus. Consider the best child education plan as soon as you plan to have one because when it comes to child education plan you can be never early.
If you have identified the time left with you to save for your child’s education you can use the following strategies to build a decent corpus to support your child’s education.
You should consider mutual funds and its various benefits over usual child plans. One of the popular ways for the best investment plan for child is through SIP (systematic investment plan). Considering the time left for your child’s higher education you need to decide on an amount that should be kept aside every month. For instance, if your kid is 8 years old and you decide to start investing to create a corpus for his B.Tech degree. Considering the rise in expenses let us assume the cost of B.Tech degree 10 years down the line to be Rs 25 lakhs. For this you need to invest Rs 13,000 amount regularly every month through SIPs. Assuming 10% returns for 10 year period you will have Rs. 25, 90,000 after 10 years of regular investment. The key to getting more benefits is to start an early investment in mutual fund for child education.
Equity funds are apt for people who are looking for lower risk factors and consider investing for a longer run. The ideal time to invest in equity funds is when your child is at an early age and you are left with 15-20 years for your retirement. This amount of period is necessary for your investment plan to withstand the volatile market conditions. You need to invest in low-risk equity funds which will also yield you returns of 12-13% annually.
Gold ETF is an exchange traded fund that allows you to track and reflect the price of physical gold. The flexibility in selling and buying gold units makes this type more efficient for best child education plan. The liquidity is higher in Gold ETF as compared to physical gold which makes it a best investment plan for child. This type of investment is recommended because the gold ETF can be used as collateral security when you require monetary help from the financial institutions. You can use this to support your child’s education when your child's education investment plan fails to cover all the expenses. Also, there are zero entry and exit loads which makes gold ETFs more cost effective and profitable.
Unit-Linked Insurance Plans or ULIPs is a type of mutual fund that invests in equity or debt funds or sometimes both. You can invest in ULIPs to build a corpus and secure your child’s future. In ULIP to avoid early withdrawal in initial years are accountable to pay hefty charges. ULIPs comes with triple benefits of great insurance coverage, disciplined investments, and participation in the equity market. When the nominee receives the sum, the future premium is discarded at the maturity value, to secure your children’s future.
This type of investment is traditional and is considered as one of the best child investment plans in India. Various banks in India offer fixed deposit plans to secure your child’s education plan. Each of them can be different in ways like some of them provide extra benefits in the form of insurance some may offer maturity payout on expiry. Investing in recurring deposits will also provide cushion to stay afloat amidst rising education expenses. No matter which type you chose don’t go for deposits that fall under 30% tax slab. This amount of taxation rate will burn a big chunk of your interest.
Looking at the various options there are three important guidelines that you should follow before you start the best investment for children. Firstly, start a child education plan as early as possible. Secondly, evaluate the risk factor, depending on your age and your source of income. Lastly, you must update your plan, whenever you find the situation is dynamic and ever-changing.
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