If you start properly planning your finances, you can give the best possible education to your child.
From a government-aided college in India, an engineering degree would set you back by around Rs 6-12 lakh. However, for a private college, the fee will be over 15 lakh. Moreover, the cost will be a minimum of Rs 25 lakh, for MBBS and other higher degrees in the Medical stream.
Even in a Tier II college, an MBA will cost around Rs 15 lakh. Inflation will further increase the cost of education. The general inflation rate in India is around 7% currently. The education sector is considered to be one of the most affected.
Earlier, the degrees mentioned above were almost half of what it is now. Thus, you can generally estimate what will be the fee rate a few years from now. If you start properly planning your finances, you can give the best possible education to your child.
Where to invest
You must first align your investments with the child’s current age. For a long duration, you can invest in equity funds, Unit-linked insurance plans or stocks. These investments are equity-oriented. Thus, they can generate higher returns in the long term.
If you are starting investments when the is at the age of 9 or 10, then you will have only 7-8 years left. Therefore, you need to accumulate within a shorter period. You have to invest more per month and diversify your investments into debt instruments as well as equity. You can also choose balanced funds.
If your child only has only 2-3 years left for higher education, you have to invest around Rs 50,000 a month. This can be through debt funds, fixed deposits, treasury bonds, recurring deposits and other debt instruments.
How early should I start planning for my child’s education?
If you start early, you can accumulate more with a lower investment. However, if you start late, you have to invest more. Therefore, there is no perfect age to start investing. However, the earlier you start, the better for your child. Your investment rate will depend on your tenure.
How to plan?
Determine how much time you have in hand and how much you can allocate every month. You must read up and research different investment options. While investing in mutual funds, you must check their 10-year and long-term returns.
However, you have to check their ratings and returns if you are investing in debt funds. However, in insurance policies for education, see the terms and conditions as well as the sum assumed. Analyse the fundamentals, if you are investing in stocks. You have to then decide whether you want to invest in one go or periodically.
However, an SIP is preferable. You must review and monitor your investments from time to time. You must also see if they are generating returns as per your expectation. You need to reallocate assets or rebalance your portfolio if they don\’t.
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