How to fulfil your child’s dreams

April 12, 2016 . Akash Kapur

Here’s a quick question for you: What do you want your child to consider while choosing a higher education stream?

A. Cost of the course
B. Interest in the course

The ideal answer is, of course, option B. When your children are passionate about what they study, they redefine excellence, and go on to make the impossible possible. However, more often than not, option A, or the cost of the programme, ends up influencing their choice of higher education.

Graduate Student_SmallAs a result, thousands of graduates end up with sub-par skills, or degrees they didn’t want simply because better colleges, or courses of their choice were financially out of reach. Thousands more are forced to squash their dreams of studying abroad for the same reason.

This doesn’t make for a very happy future for your children. Not to mention, your little ones deserve so much better than that.

It’s not that you haven’t given a thought to your children’s education or tried to save for it. Often, the fact that education costs go up sharply escapes your notice and thus, you don’t account for it in your calculations. So, when the time for college comes around, you find that what you saved up was nowhere close to the actual course expenses. You may then wind up taking on loans to meet that requirement to give your children the future they deserve. That will put a spoke in your savings plan now, wouldn’t it?

The question now is how can you help your children avoid such a fate? How can you make sure that there are no financial constraints to your children’s higher education dreams?

The answer to this is simple – by planning and investing NOW. If this seems like an oft-repeated statement, that’s because it can never be emphasised enough.

If the cost of higher education for your kid is Rs. 10 lakh today, and you need to pay for it 15 years hence, you will need about Rs. 28 lakh in 15 years, considering the future value as a result of inflation (7% assumed). To achieve this goal, if you start now, you will need to save just about Rs. 5,500 per month, assuming your investments return 12% annually. However, if you start saving 5 years later, you will need to save Rs. 12,000 per month!

Says Bhavana Acharya, Analyst, Mutual Fund Research Desk, FundsIndia, “Saving for your children’s higher education is usually a long-term goal, and so, it may be difficult to estimate the exact amount you will need. Try to save up a larger amount than what you think may be required. To determine approximately how much you need to save, you can use our education calculator.”

Where you invest also makes a difference. When you start early, you have a longer horizon. That allows you to reap the benefits of equity. Equity, over the long term, is far superior to other traditional investments like your fixed deposits. Equity funds, thus, are a good bet for your children’s higher education goals as they earn high returns and beat inflation. The risk from them can also be managed through systematic investing over the long-term.

To get started with investing for this goal, you can access the ‘Plan’ section of your FundsIndia account. You will instantly get access to a Robo-advisory-driven customised mutual fund portfolio that will help you save smartly for your children’s higher education.

Don’t let money be a barrier to your children’s dreams. Start investing for them right away to make sure you invest small amounts systematically.  This will help you get to your goal in time. Remember – keep your investments going until it’s time for your children to embark on their higher education journey.

Happy investing!

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