Why is it important to save for child’s education?
Parents’ finances and budgets have a major impact on children’s lives. Most of the time, it is usually the father who is the earning member of the family.
But times are changing, women are becoming financially independent – the acceptance of working parents in India is growing. Just as a double income can help with financial woes, double savings can fund your child’s education.
Importance to save for child education
- Bigger fund: If both parents decide to save for their child’s education, it means greater savings and a bigger fund.
- Reduces stress: It also helps divide the pressure of saving and investing; it ensures both parents are equally responsible for funding their child’s future.
- Diversified savings: It helps with diversifying your returns and investments- both parents can invest in a number of instruments of their choice like Mutual Funds, ETFs, FDs, or Gold. This is a sure-shot way to ensure greater returns.
- Stability: In uncertain times, there is a possibility that you may lose your job and have to place a pause on the education fund – the separate education fund handled by your partner can act as the safety net your child may need in the future.
A survey by Catalyst conducted in 2020 says that in most married-couple households, 59.8% of the parents are employed where both of them are working.
This data proves that more than half of India’s population has both parents working. This is added advantage for the child because the parents will have more money to put into different savings and investment plans.
How much and how to save for your child’s education?
Child education planning is extremely important; the question of how much to save depends on a child’s preferences. The education fund amount will differ based on the course they want. If parents start the investing plan early enough, the built-up corpus can be utilized exclusively for higher education.
If your child is quite young, it is better to invest in mutual funds. Since you and your spouse will be retiring in the next 15 to 18 years. It will help you to counter crashes and volatility which can come up.
It has been seen that education costs are on a growth trajectory. This will continue to rise with the increase in education inflation.
The tuition fees of colleges are on a rise and hence, students are bound to borrow loans from banks. It creates financial pressure on the student and their family as well. To avoid loans, there are many plans to save or invest in your child’s education.
Public Provident Fund is one major investment option preferred by many parents because it is authentic. Although the interest rates have decreased in recent years, parents can go for this option because of the security it offers.
The amount that is invested gets matured in 15 years so it is best to start early. If both the parents are working, they can save for their child separately to get greater returns.
2. Gold ETF
Gold is yet another option that you can go for. Most of the time, the disadvantage with gold in physical form is that you might not get a proper value for the same.
Also, you will have to pay extra money to keep it safe in the locker. The value of gold is always on the rise so it is a good option to go for. In this case as well, both the parents can go for the gold savings option so that you can better return.
3. Mutual Funds
Mutual funds are perfect for those parents whose child is still young. These are risky instruments but can be beneficial in the long run.
Once you know how much you need to save using our College Cost Calculator, you can choose the recommended funds or opt for funds you believe in – to achieve your goal!
Additional read: Invest in US index funds to save for your child’s foreign education
How to set a goal amount for higher education?
Parents often have this question in mind regarding the approximate amount that they need to save for their children’s education.
The perfect way to get through this question is to account for the best opportunities that are available in your country. It involves tuition fees, living expenses, miscellaneous, and so on.
Lesser financial burden, better returns, and a bigger fund are possible if both parents decide to save for their child’s education.
It’s not necessary that both parents have to be working, you can start a SIP for Rs. 1000 and save up to lakhs in 12-13 years with the power of compounding.
Consult an expert advisor to get the right plan
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