Beginning the journey of parenthood is not a cakewalk, it is tough and you need to manage all the things. There will be times when you are concerned about the well-being of your child, the education, health, enhancing the skills, and so much more. These thoughts are just not limited to certain aspects rather the thought of the future of the child will always be on your mind.
You surely would not want the future of the child to be hampered because of lack of funds. Therefore, it is advised to save for the future of the child at an early stage of life. To save effectively, you surely would need a reasonable estimate and the right child education plan for the eventful expenses that will incur.
Every child is special and has dreams. These dreams could easily vary right from exploring the space, flying an aircraft, serving the nation, to treating the sick, and so much more. However, all of these are not possible without quality education.
It is necessary to initiate planning the finances for the child as early as possible. This will not only enable to maximize the savings via returns from the investment but also your child can continue to dream. The child education plan will help to build a sum that would help the child at different stages of their life. Also, you can review the investment strategy from time to time and ensure that the finances are protected from the volatile conditions of the market. Let your child's dream and education remain on track even if something uneventful happens and invest in the child education plan for the bright and secured future of the child.
To start with, let us understand how to estimate the sum that you will require to save for the child’s education:
When it comes to investment, one of the most vital factors is time. On the premise of the current age of the child and the age when they pursue higher education, you need to determine the time-frame for, which you need to save. For instance, Mr Kumar’s son is four years old and he is looking forward to saving for his higher education that he possible would pursue when he is 18 or so. This means he has 15 years to save.
The present expense of education is on the premise of where you live, the kind of education you are looking forward to for your child and the college you wish the child gets enrolled. Besides, determine whether the child will continue the studies from India or move to a foreign country and pursue the degree or take admission in a private institution, etc. Continuing with the instance taken above of Mr Kumar now he knows that his son will study when he grows up. Now as Mr Kumar is an IT professional so he is somewhat aware of the rising expenses in the education sector. However, he checks the expenses of the state engineering colleges of Maharashtra. On average, the first-year engineering degree would cost him about Rs 1, 75,000, which means a four-year would be Rs 7, 00,000. Mr Kumar also assumes that his son would also pursue an MBA after the completion of the engineering course. Now, he wishes that his son undertakes the MBA degree from a renowned B-school, which for now costs up to Rs 15, 00,000. This highlights that Mr Kumar needs to save for 15 years for his son to pursue the course of engineering and for an MBA he will need to save for 19 years.
In the times we are living today, it is expected that the educational expenses will only rise when compared to any other services. Therefore, considering the aspect of inflation is important when estimating the expenses for the education of the child. Mr Kumar assumes that the inflation rate will be 6 per cent that means fifteen years from now most likely he will need a sum of Rs 14,50,000 to successfully fund his son’s engineering degree and another sum of Rs 45,50,000 in nineteen years to fund the expense of pursuing MBA.
Choosing the right rate of returns upon the investment is of prime importance. Make sure that the rate you choose is higher in comparison to the inflation rate that would help you preserve the buying power of the money. For instance, when it comes to an equity mutual fund then the rate of return is usually higher than the bank’s fixed deposit rates. Yes, the rate of return is not fixed; however, you can easily guess the long-term returns on the premise of a moderate risk mutual fund.
With the rate of return expected and the last financial objective in the mind, you need to calculate the sum that you would be required to save monthly. You can also use an online calculator and have an estimate the sum that would be needed to save each month so that you meet the end target.
The Bottom Line
When it comes to investing in the child's bright future, it is important to understand the educational needs of the child. Avoid any sort of procrastination and act fast. Education inflation is surely rising at a much faster pace. Undoubtedly parents are finding it slightly difficult to meet the growing educational and various other expenses associated with it.
You should invest in the right child education plan that will take care of every educational need of the child. The premium would be slightly on a higher side, however, such plans come with the assurance of the required sum for the needs of the child.