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Having a child is accompanied by millions of dreams, and one of the largest is providing them with good higher education. Whether your child dreams of becoming an engineer, doctor, designer, or entrepreneur, the price of education is going through the roof—particularly for higher studies in India or overseas. A thoughtful financial plan can help your child’s dreams not wither away due to financial constraints.
So, how can you invest in your child’s education without going broke? Here’s a step-by-step plan to help you establish a solid education fund.
STEP 1 – START EARLY, BENEFIT MORE
The financial planning golden rule is “the earlier, the better.” By starting early, you can:
- Earn compound interest.
- Accumulate a greater corpus through lower monthly payments.
- Get time to stabilize on life’s financial curveballs (job loss, inflation, etc.).
Example:
If you begin saving ₹5,000 a month at the age of 3 for your child and put it in an instrument that pays 10% return per year, you can save more than ₹30 lakh by the time your child is 18 years old.
STEP 2 – ASSUME THE COST OF EDUCATION IN THE FUTURE
Present-day college fees will not be the same ten years later. Take into account inflation, which in the educational sector can be anything between 8% to 12% per year.
Example:
- A course of ₹10 lakh today could cost approximately ₹25–₹30 lakh after 15 years.
- If planning for foreign education, include tuition fees, travel, living expenses, and exchange rates.
- Utilize online education cost estimators to reach a realistic figure.
STEP 3 – SELECT THE RIGHT INVESTMENT VEHICLES
Diversify investment according to your risk tolerance and the age of your child:
Long-Term (Child age 0–10):
- Equity Mutual Funds: Suitable for 10+ year horizons; gives high returns in the long run
- Public Provident Fund (PPF): Government-assured, secure, and tax-exempt
- Sukanya Samriddhi Yojana (SSY): If you have a girl child below 10 years
Medium-Term (Child between 10–15 years):
- Balanced Mutual Funds or Debt Funds: Less risky, safer as the goal nears
- Recurring Deposits: Low risk, consistent savings behavior
Short-Term (Child above 15 years):
- Fixed Deposits or Debt Funds for Short tenure: Safe and liquid when required
STEP 4 – SECURE THROUGH EDUCATION INSURANCE PLANS
Look at Child Education Plans offering insurance + investment:
- Offers financial security in the event of the parent’s death.
- Ensures further financing of your child’s education.
- Available with all life insurance companies (ULIP-based or conventional endowment plan).
But compare returns cautiously—mutual fund + term insurance usually results in better performance.
STEP 5 – DON’T IGNORE SCHOLARSHIPS, LOANS & GRANTS
Not everything has to be from your pocket. Make the child aware of:
- Merit-based scholarships
- Government education loans (Vidyalakshmi portal)
- Private education loan options with easy repayment
- Grants and sponsorships from NGOs, embassies, or foreign universities
Proper documentation, sound academics, and early application can unlock numerous avenues.
STEP 6 – TRACK, REVIEW & ADJUST
Financial planning is not a one-time thing. Each year:
- Re-evaluate your returns on investments.
- Review trends in education inflation.
- Rebalance assets if necessary (move from equity to debt nearing the target).
Utilize tools such as SIP calculators, portfolio trackers, and goal planners to keep on track.
EXTRA TIPS: INTELLIGENT MOVES PARENTS CAN MAKE
- Keep education money separate in a dedicated account to prevent it from being spent on other purposes.
- Educate your child about money management early so that they appreciate and utilize the investment sensibly.
- Prevent lifestyle inflation—save proportionally with income increases.
LAST THOUGHTS
Planning your child’s tertiary education is not all about the figures—it’s about providing them with wings to fly. Through thrifty savings, intelligent investments, and forward thinking, you can make their dreams come true.
Remember: education costs will continue to increase, but so will your self-belief—if you plan accordingly.