Children’s education: How to save for a better future for your child

Published: August 15, 2017 2:15:08 AM

As a responsible parent, you would not like to compromise on your child’s career, regardless of the rising cost of education. You need a well-developed investment plan that will allow you to meet all expenses for your child’s future.

Children's education, Children's education in india, how to save for Children's education, medical expenses, medical expenses for children, policy coverage, term insurance, education expenses, Financial Planning for Higher educationHealthcare for mother and child will be a potentially big expense for new parents. (Image: IE)

Ramalingam K

As a responsible parent, you would not like to compromise on your child’s career, regardless of the rising cost of education. You need a well-developed investment plan that will allow you to meet all expenses for your child’s future.

Provision of medical expenses
Healthcare for mother and child will be a potentially big expense for new parents. New babies require regular checkups and immunisations. So you need to make provision for these expenses well in advance even before the arrival of the baby.

Add newborn to your mediclaim policy coverage
If you have an individual mediclaim policy, add the newborn as a member in that policy and get coverage. Do you have an employer provided mediclaim policy? Then, check if the terms and conditions allow you to add the newborn for coverage. If it allows, then add the newborn to that policy. If it doesn’t, then take an individual mediclaim policy for your child.

Increase term insurance
You need to check whether the existing insurance coverage is sufficient to support your child’s future in case of any mishap to you. If it is insufficient, then take term insurance policy for the gap.

Ongoing education expenses
Education expenses are skyrocketing every year. What your father spent for your college education is now what you need to spend for your child’s primary school education. So adequate provision in your monthly budget and a projection for cash flow with reference to school education expenses will be an important exercise for you.

Financial planning for higher education
It is going to be the biggest financial shock for you if you have not properly planned for your child’s higher education. Don’t delay this plan, start this plan as soon as the arrival of the newborn. Then you will have time on your side. Assume your child has completed his schooling today. Calculate how much you may need to spend for his higher education at today’s costs. This cost is going to go up every year due to inflation. So project this cost with inflation rate for the future. Now you will know how much money you exactly need for higher education in future when he actually completes his schooling.

Other dreams for your child
Apart from higher education, you may have some other dreams like buying a home for your child, setting up a corpus for your child’s future profession or business or corpus creation for wedding expenses. You need to follow the steps mentioned in ‘Financial Planning for Higher education’ for these dreams also to estimate the kind of money you will require to fulfill these dreams.

In case you don’t have time or knowledge to do this financial planning you can seek assistance from professional financial planners. They will save your time and make sure that you are achieving these financial goals for your child.

Savings account for your child
You can open a savings account in the name of the minor. Whatever gifts the child receives by way of cheque or cash on occasions like birthdays can be invested here. Also, this account can be used to motivate the child to save from his pocket money. The other investments which you make for your child’s future like mutual funds or company shares need not be invested in the child’s name. Banks, generally, will not give loans against shares or mutual funds held in the name of a minor. So, it can be invested in your name. As and when required it can be encashed to meet the necessary
expenses for the child.

The author is founder-director, Holistic Investment Planners Edited extract from Tax Guru.

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