Educating the child is the foremost goal of any parent. Planning early is the key to building a significant fund and securing the future of your little ones. But inflation is pushing up college expenses. The pressure to pursue higher education and competitive admissions due to limited seats equal paying higher fees. Further, the inclusion of technology has led to a sharp rise in the overall expenditure.
This is when an education loan can seem like a relief. But it is necessary to ensure children do not start their careers burdened with debt. The good news is that you can help your child achieve their dreams, ambitions and aspirations with a few smart financial strategies. Here’s a look.
Child Education Insurance Plan
The best child plan offers guaranteed returns which is vital since academic competition is increasing day by day. Work with an insurance company that offers a mix of insurance and an investment plan. It will make sure money is not a hurdle when it comes to higher studies. The top features of a good child insurance plan are various risk management options, tax benefits under sections 80C and 10 (10D), payouts in case of unfortunate death of a parent, and a fixed income. Start investing as soon as you can and understand a variety of payout frequencies for an informed choice.
Keep Inflation in Mind
Not keeping the rising prices in mind can cost you dearly in the long run. For instance, what is reasonable today may not be affordable tomorrow. Assess where you stand financially, consider the expected inflation rates of the country, know the potential expenditure and plan the finances accordingly. Studies have found that the general price level at the end of 2022 would be around 25% higher than it was at the beginning of 2019. You can expect 8-10% on education. Be realistic about assuming the inflation and start investing in safe tools like child investment plans early to be able to reach the desired corpus.
Finalise the Total Amount
Check the expenses for tuition fees, books and equipment, allowance for accommodation and transportation and miscellaneous needs. Calculate the total sum required for the number of course years. Identify other financial requirements of the child as well like extra-curricular, registrations for competitions and study materials. Once you get a fair idea of what is required for the future, it becomes easier to start investing.
Have a Definite Plan
Nobody has an idea what comes next. It would be a smart move to plan a second investment besides a child plan. Market-related products can help you to benefit greatly in the long run. For instance, a ULIP is highly flexible and can be extremely beneficial for your child’s educational finances. You can also consider a mutual fund which is one of the best ways to accumulate wealth over a specific period. The amount can be cashed out early in case of unexpected incidents and used to continue the child’s education in your absence.
Read the terms and conditions carefully before investing in a child insurance plan. Pick the one that is savings oriented. Know the prevailing tax laws as well for an informed choice.