With the rising cost of education, it is now crucial for the parents to start investing in their child’s education as soon as possible. Read this post to understand the importance of investing for your child’s education and how you can begin investing.
As a parent, you have a number of responsibilities towards your children. One of the most important of them being a good education. But with the education costs in India rapidly increasing, you cannot just rely on your savings to manage the expenses. You need to start investing in your child’s education from an early age to give them a bright future.
Fortunately, there are now many investment options that you can consider to invest for your child’s education. But before going through some of the top investment options, let us first try to understand why an investment plan for your child’s education is a necessity.
Planning Your Child’s Education Expenses
From primary to secondary and then to higher secondary, it is now getting increasingly difficult for the parents to keep up with the consistently rising cost of education in India. Apart from the education cost itself, there is also baggage of several other associated expenses like private tuitions, school essentials, and more.
While you might already be saving for your child’s education, the rising inflation is reducing the value of your money, and it can have a severe impact on your savings in the long run.
The average education inflation in India is assumed to be close to 10%. This means that an engineering course which costs Rs. 8 lakh now will cost somewhere around Rs. 17 lakhs in about 8 years. The same by 2030 would be Rs. 30 lakhs. Apart from the course fee, there will also be a private coaching fee which is currently around Rs. 75,000 to Rs. 1 lakh per year.
Moreover, if at all your child wants to pursue higher education in a foreign country, the expenses would be considerably higher. Currently, the cost of pursuing MS from a reputed university in a country like the USA is close to Rs. 30 lakhs and is expected to only rise in the future.
Investing for Your Child’s Education
Your child’s education is a long-term financial objective. This makes equity mutual funds an excellent choice for your investment. These funds are well-known for their long-term wealth generating ability and can help you build a large corpus even with limited savings.
The average returns of most of the top equity funds are around 10% a year, and by remaining invested for several years, you can see your capital benefiting from compounding and helping you to generate even higher returns.
SIP in Mutual Funds
If you’re still in your late 20s or 30s and working on a child education investment plan, SIP in equity fund can be a great option. With SIP, you can start investing as little as Rs. 500 a month in a fund of your choice. You can also increase the SIP amount as and when your income increases.
As compared to other types of investment options, SIP offers a host of benefits while also providing higher and complete convenience.
To ensure that your child receives the best education, you need to start investing for it as early in life as possible. Equity funds have considerably higher capital appreciation potential as compared to other investment options, and with SIP flexibility, it is easier to start investing with a minimum amount.
Invest regularly for several years, and you can give your child the gift of a bright future.