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5 Best Ways to do Financial Planning for Child Education

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"Education is the passport to the future, for tomorrow belongs to those who prepare for it today". ~ Malcolm X

Parenthood is one of the most difficult tasks someone can undertake. Various elements of your world adapt to match the demands of your little one as soon as he/she enters your universe. You want to fulfil all of your responsibilities as a parent to the best of your ability. One of your key responsibilities is to do financial planning for child’s education.

If we consider cost inflation, education has never been more expensive. Under such circumstances, all you want is to have enough money saved to invest in your child's education without worry.
To provide the best education to your little one, you must plan ahead for the best investment for your child education. Your child's potential is limitless, so why limit them by failing to plan for their outstanding education early? Having a child plan for education allows you to look at many possibilities and choose the best investment for your child’s education.

You can invest in mutual funds or buy stock directly on the stock exchange. When held for 15-20 years, these investments have a great potential for higher returns (subject to market conditions). Additionally, starting to save for your child's future early eliminates the stress of accumulating surplus at the last minute and allows your assets to benefit from compounding.

Furthermore, when investing, you must determine your risk appetite to evaluate how much risk you are willing to face with your money.

So, it would be wise to plan your budget wisely for the best investment for child education. Here are a few financial planning strategies to consider:

Start as early as possible

The importance of starting early with financial planning for child education cannot be overstated. MBA prices in India are currently approximately Rs. 15-20 lakhs and expenditures for pursuing MBBS are also in that price range. Foreign education costs between Rs. 30 and 50 lakhs on average. These prices may double in the next 15-20 years due to inflation. As a result, it is critical to recognise the value of investing as soon as possible in optimising the benefits of compounding.

Understand your current possessions

You might have already made investments in PPFs or FDs. Your existing investments will assist you in meeting the financial objective you have set for the education fund. It would be best to understand how much additional money you'll need to reach your end goal.

Keep a check on your ROI

Your child's education is an on-going process in which you will have to plan the best investment for child education. It is highly advised that you invest in regions with modest levels of risk that offer long-term, high returns during the planning process. High-reward long-term plans that are less affected by market swings emerge with the desired corpus in the period set. Investing in a moderate-risk plan with a reasonable expected return is better than investing in a high-risk plan with uncertain returns.

Don't overlook inflation

The higher the rate of inflation, the higher the price of education. When making any form of future investment, people frequently neglect the impact of inflation. To prevent making this error, do enough study to understand how inflation will affect your objective of providing your child with a high-quality education. While creating a child plan for education, evaluating the increase and fall of the value of money is crucial when analysing the cost of education.

Inculcate a habit of savings

The first step is to design your monthly budget and choose an amount that you need to save each month. After you've set a goal, work towards it every day and make sure you're on track to accomplish your monthly objective. Planning a monthly budget is beneficial not just for collecting money each month but also for instilling the discipline of saving regularly.

For all parents, ensuring that their children receive the finest possible education is a top priority. However, in order to make your child’s future bright you will have to do long-term investment planning in the best investment plan for your child’s education. Not saving enough can be heavy on parent’s pocket, but having to compromise on their education due to a lack of foresight is much more costly.

Disclaimer:

*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time

The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.

Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

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