Parenting has its most important stage of child investment which every parent will be worried about. The educational goal is the one that will be critical as the plan is a fixed route.
The investment plan for your child's education is prioritized and predetermined, which makes it completely distinct from that of the others. The investment plans for acquiring a car or a home can be postponed for another period if the education goal plan is being brought into the picture because such a plan is essential as the education investment costs an arm and leg, and must be ready to achieve it by hook or by crook. However, before your child turns 18 years of age, there is a sufficient fund for the preparation and protection of their studies.
The educational services given by the educational institutions are hard sold by analysing the parent’s emotional fondness towards their children to give them a good education making them go even in dire circumstances. According to our experience and expectations, instead of focusing upon their child's financial goals, a plain vanilla equity fund is better than the financial plans.
When the Child Unit Linked Insurance is being approached by the parents, the expected results in the betterment of their children will not be saturating their expectations due to three blockages given by the insurance companies. The first one will be the rotation of your investment towards a term cover and the second will be the minimum five fixed years of fund stagnation and will be prevented from pulling back their investments if they find a better opportunity of investing in another field of their education. The third hardest hindrance for the investors is that there will be no ubiquitous valued calculations which make it difficult for the investors to compare their plan with other plans.
But there is a four-step tutorial for elevating the pain of critical planning in your child’s goal. Since this is a one-way policy, the parents must be very sure about what they are planning because there is no turning back in this plan.
In India, the most expensive item in all places is education which has become a luxury for all parents. In the best educational institutions, the fees which were 5 to 6 lakhs for the engineering courses six years ago, now have risen to 12 to 18 lakhs. The private educational institutions have also hiked their educational fee structures through an annual escalation clause. Institutions like Bits Pilani, have declared a hike in the engineering fees. There must also be a risk factor coverage for two issues if the parents are planning to parcel their ward for overseas studies such as inflation in the courses and also the rupee depreciation. The high rate of inflation on college degrees thus makes it vital for you to take a position in high-return-earning investments to satisfy this goal
Investing in equity funds is one of the best alternatives to reduce inflation in the assets. But, investing in mutual funds for less than five years is not advisable as it is subjected to market risks in it. Thus, it indicates that the investment for child education should from the age of 8 to make it possible during the age of 18.
To make a bigger amount of early investment is also encouraged by the parents. For example, if the parents are saving 30 lakhs in the present scenario based on the current financial plan, the same when the child attains the age of 18, the fund differentiation will have a backlog at the time as the same fees will have estimation 80 lakhs at an inflation rate of 10 percent.
That may require a monthly SIP of Rs 33,830 during a fund earning an annualized return of 12 percent. The investors can also invest Rs. 25,085 if they have started at an early period before five months.
Three, the investment through the Systematic Investment Plan in three multi-cap funds is highly prescribed if the parents are in the mindset to invest at an early stage. If you've got a better risk appetite, you'll use a mixture of two multi-cap and one mid-cap fund.
Fourth, if the parents lost their hand in investing at the right stage, there is still an opportunity for them for five years through hybrid plans. A university education that costs Rs 30 lakh in today's prices will cost about Rs 48.3 lakh in five years' time at a ten percent rate of inflation. If you'd wish to stick with safe debt investments with an 8 percent return, that might mean investing Rs 65,760 a month in debt fund SIPs. But if you select a balanced or conservative hybrid fund with likely returns of 10 percent, you'll manage with lower SIPs of Rs 62,400 per month.
Five, the investment package must be proper and stable in a manner that it should support your child’s college expenses even in the situation of your death. Better go for the online purchase of a plain vanilla term plan.
You would decide to come up with a saturated plan after seeing the above calculations. The present fee for a top university for an undergraduate degree now costs up to Rs. 1 crore. Such an investment decision will be a harder one for the parents as they are planning to send their children to a prestigious university. You must come to the conclusion of seeing a large sum of savings only if you have favorable parameters. Moreover, you should explain to your children about financial constraints and the value of money.