Mutual fund for children’s higher education


The efficient financial planning is to begin really early when your baby who is barely 2 years of age.

Your dream should be to fund your children's dream education and gift your child a bright and secure future.

Each parent wishes the best for his or her children and dream to give them the best education to gift a bright future. No parent wants to make any compromise when it comes to their children’s education or future. So, planning their children’s education is a priority for each parent. Providing good education to your child not only enables him to excel in any career but also help to build a strong personality. However, planning and investing wisely for securing your children’s future is not an easy task. You cannot find any benefit by investing and saving in an ad-hoc way.  Since education in India is becoming more and more expensive day by day, you must have a sound financial strategy and investment portfolio to give your children the best education to secure their future. SIP in mutual funds is a good investment choice for parents who wish to save money for their children’s education. It enables them to make small, but regular investments and later they can benefit from compound interest from it. Let’s check why the mutual fund is a great option to fund your child’s education.

When to start investing for your child’s education

Many people wonder when to start investing in their children’s education. The answer is parents can start for their children’s education as early as possible. Time is an important factor to decide this, as the longer you invest, you can reap more benefit from it. You may be wondering to know that the cost of education rises every year. Since it rises faster than inflation, the only way to secure your child’s future is to start SIP in mutual funds as early as possible.

How much money require to invest for your child’s education

You must have an idea about the future cost of higher education to calculate how much funds you require for your child’s education. An investor can calculate it by adjusting the cost of higher education today with the inflation and the current age of his or her child. After assessing the future cost of education, you can start with a lump sum or monthly investment based on your budget. You can choose the best investment option like mutual fund considering the current age of your child, availability of fund, and your risk-taking capacity.

Things to consider calculating the amount required for your child’s education

Even if you decide to start investing for your child’s education as early as possible, you must have a plan to save effectively. A wise parent should consider a few things before estimate the sum required to save for his or her child’s education. Following is the simple steps that help you to assess the amount that you will need to secure your child’s future.

  • Consider the time horizon: Time is an important factor to decide the sum required for your child’s education. You can determine how long you have to invest based on the current age of your child and the age at which he or she will pursue higher education.
  • Cost of education: You must have an idea about the current cost of education before deciding the amount that you need to invest regularly for your children’s education.  The cost of education depends on various factors like the place where you live, the type of college where you want to send him or her for education and the level of education your child wants to pursue.  You can also consider whether you will want to send him or her to abroad for study or locally for undergraduate.
  • The effect of inflation: The cost of education goes up rapidly than the cost of many other services and inflation is a prime reason for that. You need to consider inflation also while calculating the amount to invest in your child’s education.
  • A reasonable rate of return: Another important thing to consider for estimating your child’s education is a reasonable rate of return.  Ensure to pick a rate higher than the rate of inflation in order to maintain the purchasing power of the money.
  • Estimate the amount for your monthly savings: Now calculate the exact amount that you need to invest monthly for your child’s education based on the financial objectives and the expected rate of return. With the availability of online calculator, it is easy for you to figure out the amount that you will need to save regularly to secure your child’s future.

Why mutual fund SIPs a good option for child education

  • The most attractive benefit of SIP is that it ensures you to invest a fixed amount regularly.
  • By investing in SIP regularly, an investor can benefit the power of compounding.
  • SIP has a recurring nature which helps to establish a discipline in investing and saving regularly.
  • Largely automatic and simple, an investor can set an ECS (Electronic clearing service) mandate for a SIP on his or her bank account.
  • You can start a SIP with even Rs.500 monthly and can increase the investment amount through SIP top-up facility when you have more earnings.

 

Age of ChildTime PeriodInvestment optionsInvestment required
0-5 years0-15yearsDiversified equity fundsSIP of Rs. 10,550
6-10years8-12yearsDiversified equity funds
Equity – oriented balanced funds
Debt – oriented balanced funds
SIP of Rs. 12,600
11-15years3-7yearsEquity – oriented balanced funds
Debt – oriented balanced funds
Debt funds
SIP of Rs. 30,050

Considering cost of higher professional courses in 2033- 35 will be approx. Rs. 75 lakh

 

The most precious gift that you can give to your child to secure his or her future is a good education. A sum invested regularly can help to accumulate a large corpus to take care of your children’s education. Start saving early and invest regularly helps you to enjoy the benefit of compounding. Finding the right investment plan for a child’s education can be a tough task for many parents. Mutual funds can be an ideal solution for them as they can save a certain sum of money regularly with its SIP. What you need to do is to choose a convenient frequency like weekly, monthly or quarterly and invest a fixed amount regularly in mutual funds. Invest in mutual fund SIP regularly and fulfill your financial goals for your children’s education in a free manner.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh