Without exception, every parent out there would agree that the joy of having a child is unmatched! And to want nothing but the best for your little one comes naturally to you.
Out of all their other needs, In today’s day and age, ensuring best education would be on the top of your list. Good education will not only secure their future, but also go a long way in shaping their characters and making them responsible and civilised citizens who are an asset to the society.
Most parents would be well aware of the spike in the education cost with every passing year. For instance, currently a 2 year MBA course in a top of the line management institute would cost almost 4 lakhs. Given the current inflation rate of 10%, this will shoot up to nearly 26 lakhs in the next two decades when your child is likely to sign up for that course.
So, the only way to ensure this for your child is to not only systematically plan well, but start early on in their lives by choosing the best child plan that suits your needs as well as budget.
Let us look at some vital points to be considered while choosing the best child education plan for your young one:
It is important to create a separate portfolio for child plan to facilitate better management of funds. It is also advisable to set aside separate funds when planning for more than one child.
Have designated pockets of investments for cost of their education in the short term, mid term and long term respectively. Allot separate regular funds to each pocket and ensure you keep a close track on them.
Accordingly, it is important to choose the most suitable child investment plan.It has been observed over time that equities offer the best inflation adjusted repay than assets like gold, real estate or debt when it comes to long term investment.
Mind The Inflation In Education Cost
Along with a tremendous development in the quality of education in India, it goes without saying the cost is parallely going up as well. Right from kindergarten, pre primary, primary, high school and university to higher education, it is becoming increasingly challenging for the parents to cope with the daunting monetary demands of their children’s education.
A survey by National Sample Survey Office (NSSO) concluded an astonishing hike in general education cost (primary to post graduation) of 175 percent in just about 6 years. And the hike in professional and technical education went up by 96 percent in the same period. These expenses include books, coaching, conveyance and the likes over and above the actual course fees.
While it could be a bit overwhelming to gauge what your child would want to pursue a decade or so later, there are a few things you may keep in mind to help you choose the best child education plan:
- Whether you prefer sending them to private or public institutions. The cost of providing education in private schools would be about 11 times more than in government run schools whereas the cost of higher education in private colleges would be about 3 times more than in government institutions.
- Whether you want the child to pursue post graduation. So, for instance, if your target is a postgraduate degree currently costing about Rs 10 lakh, say about a decade from now, based on the annual inflation rate, you may need to be prepared for double the amount.
- Aspirations for a foreign or Indian degree? A foreign higher education course that currently costs about $100000 could gradually go up as well based on global inflation.
After considering these factors, it is also advisable to review the child plan investment amount each year.
The area of investments for your child plan would majorly depend on how soon you have started which means how many more years do you have until your goal.
As discussed above, if you still have a decade to go, equities options like ULIPs, equity mutual funds would be your best bet. Additionally, other options like a public provident fund (PPF) account may also be considered.
● Mutual Funds
You can start with SIP in a couple of schemes that are a viable combination of mid cap and large cap funds. Periodically, you may add to that from the funds received on their birthdays or as gifts.
Alternatively, you could also invest in equity based saving schemes that save tax in addition to funding their future education. You may choose to redeem units when needed for their education whilst keeping the investment intact.
Given their waiver of premium option, Child Ulips are a viable long term child investment plan option to make sure they get the required amount at right age.
Of Course, as a parent, you need to make sure you have adequate life insurance coverage like a pure term insurance, so your child’s needs are taken care of in the event of an unfortunate incident.
● Public Provident Fund
PPF is another long term (15 years) child investment plan wherein you open an account in your child’s name which will create a tax free earning for the child. After completion of 6 years, as and when in need, you may withdraw partial amounts for your child.
On becoming an adult, your child can start contributing his money to the same PPF which remains valid indefinitely.
As you approach your goal,say at least 3 years before, ensure you de risk your child plan funds by shifting from equity to assets with relatively lesser variability.
In addition to all of the above factors, resist the temptation to not touch the child investment plan for any other needs. Even if you may need to stop your monthly contributions periodically, ensure you do not withdraw the child investment plan for any other short term needs. There are lots of insurance comparison tool available online on the web. Do check, compare and buy the best one.