As a parent you want the best for your children. To set them up for success, spending wisely on their education is the most prudent move that you can make. However, to ensure that your children get to learn from the most accomplished faculty at reputed institutes, saving and investing for that is non-negotiable.
You don’t know what your child may want to study 10 or 15 years from now, but you can be prepared for every eventuality. In case you want your child to study at a premier institute like IIM, you will pay roughly Rs. 10 lakh per annum as fees, while at a top institute abroad, you may have to pay more than double this amount each year. Considering the rate of inflation, even if you assume it to increase by 10–12% per year, you will have to pay an exorbitant amount 15 or 20 years from now. In fact, earlier this year, 9 IIMs indicated that they would be hiking their fees by 5-17% for the 2018-20 batch.
So it’s easy to see how investing and saving smartly will hold you in good stead. Take a look at a few tactics that you can implement right away.
Use Monetary Gifts Smartly
Gifting money is still largely prevalent amongst family and close friends in India, and instead of putting this amount towards avoidable expenses, you can set it aside for your child’s education. While a savings account is the most basic option, you can also use the funds to invest in fixed deposit if you’re a conservative investor. But, it is important to remember that your finances won’t grow as significantly as it would if you were to invest in market-linked instrument.
Invest In SIPs
Systematic Investment Plans (SIPs) give you a smart way to invest in funds, while controlling the amount of risk that you take on. By setting aside a fixed amount each month, you can create a significant corpus. In fact, the longer you stay invested, the better your returns will be. Moreover, you can increase the amount as your income increases and multiply your money even faster. By taking on more risk, you reap greater rewards.
Consider Balanced Funds
If you are short of time and haven’t started investing or saving as early as you planned to, balanced funds serve as the perfect investment option. Investing in a mix of debt and equity, such as stocks and bonds, will give you the high returns that you seek with an adequate degree of protection.
Now that you know of a few ways in which you can invest for your child’s education, keep these guidelines in mind.
Start As Early As Possible
The earlier you start, the more risk you can absorb. Also, the longer you stay invested, the higher your returns are likely to be. So, if you start investing when your child is one year old, you can dedicate 70% of your investment amount to equity and park the balance in safer long-term investment options such as PPF.
Adjust Your Portfolio Each Year
It is important that you evaluate how your current mix of instruments is performing annually and balance your portfolio accordingly. Look into what works and what doesn’t and increase the investment amount in line with salary increments.
Play it Safe When You’re Nearing the Finish Line
While it is important to be aggressive in your investment strategy and take calculated risks, when you have only 2 or 3 years to go, it’s a good idea to cut down on the volatility and shift the corpus that you have created into a safer avenue. At this juncture, with only a few years to go, any fluctuation in the market can cause a dent in the amount you’ve painstakingly raised.
Keep these strategies in mind to save and invest for your children’s education so that you can give them the best access to every opportunity.
The writer is CEO, BankBazaar.
BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.