Every parent dreams to prepare their child for a dynamic future through the best possible education and according to a survey, 50 per cent of a women’s key driver for investment is a child’s education and 70 per cent of moms are highly involved in their child’s education.
The first step in planning to enrol your child in a prestigious school in India or abroad is Financial Planning and below are five factors which you must consider before investing in the education of your child.
The current cost of education:
The primary thing to do is to decide what your goal is and to decide whether you are planning for your child’s school fees or an undergraduate or postgraduate program. You must also decide on whether you are planning to send them to top schools in India or abroad. Also, you must consider the course which interests your child the most to calculate the current cost of education.
Inflation rate:
The price of education will rise in line with the rise of inflation. Thus, while planning for your child’s education, it is crucial to account for inflation of about 8-10 per cent per annum.
Child’s age and admission age:
This factor is crucial in determining the time period of your goal and the earlier you make plans for your child’s education, the more time you will be having for your money to grow.
Investment Options and expected rate of return:
The time period available to achieve the goal and the risk appetite plays an important role in this category. If your goal is short-term, you can look for investment options like FDs, RDs, Debt Mutual Funds, etc., and if your goal is long term you can opt for various long-term investment options such as equity ETFs, Equity mutual funds, gold bonds, etc. You can also diversify your investments in order to manage the risks.
Investment Amount:
You must calculate how much investment you will need to achieve your goal of providing the best education for your children. You can invest a fixed amount regularly every month or a lump sum if you have surplus funds.
The key element here is to start early and use the strategy of compounding and also revisit your plan every year to see whether you are on track. You can change your investment plan accordingly if there are changes in your goal.