5 Financial Planning Tips for Your Child’s Education

5 Financial Planning tips for Your Child’s Education

If you are a parent or parent-to-be, then the only priority in your life should be securing your child’s present and future. There is nothing more important for a parent than their children’s happiness. Unfortunately, in today’s world, joy and happiness cost money. Hence, you need to begin investing as early as possible. Investing early gives your investments a chance to grow and help build sufficient corpus for your children’s education. The earlier you invest, the more investment avenues you can choose and balance your investment risk. Secure your child's future with a Children Gift Fund investment.

You can invest in mutual funds or even directly purchase shares from the stock market. These investments have a high potential of giving you better returns when held for a period of 15-20 years. Also, starting to save early for your child’s future reduces the trauma of gathering surplus at the last moment, and allows your investments to benefit from the power of compounding. Also, while investing, it is necessary to identify your risk appetite, so that you know how much risk you are willing to take with your financial investments.

So if you want to plan your children’s education smartly, here are a few financial planning tips that should help you out:

1. Inculcate the discipline of savings, chart out a monthly budget

The first thing to do is to plan your monthly budget and come up with a target amount that you need to save every month. Then once you’ve set a target, work towards it every day and make sure that you manage to keep enough so you can meet your monthly goal. Planning a monthly budget isn’t just helpful for collecting money every month; it can also inculcate the discipline of saving regularly.

2. The early you start, the better it is

The essential part of financial planning for your children’s education is to begin as early as possible. The current MBA fees in India cost around Rs. 15-20 lakhs, whereas payments for pursuing MBBS too costs somewhere around the same price tag. Foreign education costs at an average of Rs. 30-50 lakhs. Due to inflation, these prices might double in the next 15-20 years. Hence, it is crucial to realize the importance of investing as early as possible so that you can maximize benefit from the power of compounding.

3. Always keep a long-term investment horizon

An investor’s financial goal may vary depending on their individual needs. If you do not have enough time, then there are options like debt funds and gilt fund. But if you are planning to invest in mutual funds or directly in equities, you should stay invested longer and allow your money to do the hard work for you. You can also invest in funds like children's gift which generally come with a lock-in period. Not only does this inspires parents to stay invested for the long term, but also allows them to benefit from the power of compounding.

4. Spend on when required

Remember that saving money is the most crucial aspect of financial planning for your children’s education. Hence, parents should avoid all the unnecessary expenditures so that they have enough money to invest in their child’s education.

5. Identify your existing investments

You may have already invested in several schemes like PPF (Public Provident Funds) or FDs (Fixed Deposits). Your current investments shall help you in reaching the financial goal set for the education corpus. You should get a clear idea about how much more you need to invest to achieve your final target.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.