Saving for Child’s College Education – Plans and Schemes to Help Decide

The key mantra: Start early

This is the fundamental rule for any kind of major investment for the future: begin while you have time so as to gather a significant sum of money.  Any course that costs Rs. 6 lakhs today will cost double in the next 6 years and more going ahead. So if you start while your children are young, you can make small strategic investments. Time gives you the strength of compounding. If you delay, you are likely to encroach upon important investments like your retirement savings. 

what are the best instruments to save for your child’s college?

1. Equity Mutual Funds

   Investing in equity mutual funds worth Rs 5000 a month can give you almost Rs 33 lakhs, if the return is approximately 12% p.a, which will suit your requirement. However, the key for this investment is that you need to give it time. Hence it is ideal for the long term when you have time on your hands.

2. SukanyaSamriddhi Scheme

   An initiative taken by the Government of India, it is a good investment vehicle if you have a daughter. Under this scheme, you can invest anything between Rs 1000 to Rs 1.5 lakhs for a time period of 21 years. Although 21 years might be too long, you can make partial withdrawals after your child turns 18. So you can use this as a partial investment option, alongside other investments as this has an attractive interest rate of 9.2% p.a.

3. PPF (Public Provident Fund)

   Keeping in mind its simplicity and flexibility, a PPF is the ideal tool for long-term investments like your child’s college education. Also, the time frame for maturity, i.e. 15 years, is ideally suited for this investment. Another key feature of this plan is that you can choose an amount as low as Rs 500 in a year, or go uptoRs 1.5 lakhs as your pocket permits.

What if you have to plan for the short term?

If you haven’t started investing for your children education plan from their childhood, you still have enough investment options to gather adequate corpus to take care of college expenses. If you have a time frame of 8-10 years till your child attends college, you can consider investing in diversified equity funds, debt-oriented balanced funds or equity-oriented balanced funds. If your time frame is lesser than 4 years, you have to consider recurring deposits, MIP funds and debt funds to gather a significant corpus of roughly 20 lakhs. 

Things to bear in mind

When making long-term investments for securing your child’s future, you need to review the portfolio at least once a year, to ascertain that there aren’t any components that are not giving the desired returns. Also, assess your goals; if you are looking to send your child abroad, you will need to increase your investments. To be safe and ensure your money is safe, it is advisable that you begin shifting your money towards debt-based funds to keep safe distance from market volatilities.