A good education is essential for a child’s development and future success. Providing their child with the best education is a goal most parents cherish and work towards. However, as education costs continue to spike, it is becoming increasingly challenging for parents to fund this goal, which has consistently been among the top aspirations held by Indians in the BankBazaar Aspiration Index 2022.
Education inflation, which is the rise in education costs over time, is happening at twice the rate of cost inflation. A recent BankBazaar report ‘Inflation, Education, & Your Child’ details key factors about the education inflation, which currently hovers around 11% to 13%, and if current trends continue, could double every six to seven years.
Considering all of the above, the task of saving up for your child’s education may seem daunting. Which is why, it is imperative for parents to factor in all relevant factors, such as education inflation, when planning investments to fulfil this goal. Let’s take a look at some important tips which can help parents in their efforts to achieve this goal.
Determine your goals for your child’s education
When planning investments for your child’s education, make sure to consider some important factors such as the type of education you child may want to pursue, how much it is likely to cost, inflation, and the time you have to raise said funds. All this will help you in creating an investment strategy that is closely aligned with your goals.
Time can be a powerful ally
When it comes to investing, the earlier you start, the better. By investing early, you can derive the maximum benefit of compounding in growing your wealth. If you invest regularly, regardless of the amount, you can build a sizeable corpus with time.
Adhil Shetty, CEO, BankBazaar.com, says, “Children’s education is a long-term goal that may require substantial funds. If you start investing early in a disciplined and consistent manner and leverage the power of compounding, you can create a significant corpus to fund your child’s education.”
Picking the right investments
When investing for a specific goal, it is important to pick the right investment that aligns with your needs. When it comes to children’s education, you should look for an investment that beats inflation, is tax-efficient, and provides easy liquidity. Choosing the wrong investment would lead to you missing your goal.
“Saving for your children’s education is one way you can ensure they receive quality education. By planning well for this goal, you will be able to send your child to the best school and college, without being held back by financial constraints,” Shetty adds.
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Review your investment strategy regularly
There are some goals, such as children’s education, which can evolve with time. Thus, when investing for such a goal, it is important to review your investment strategy from time to time, to ensure it aligns with your goal. As your child gets older, you may want to gradually shift towards more conservative investments to preserve capital. Also, it is advisable to remain informed about changes in education costs, tax laws, and investment performance.
Protect your investments
Uncertainties are a part of life, but you must not let them derail your goals, or the future of your family. Life and health insurance are two essential insurance covers which protect you and your investments in the face of a calamity. If you have dependents, especially children, getting yourself and your family adequately insured can help you secure their future wellbeing.
When it comes to investments, a disciplined approach can make the most difference to your wealth generation efforts. Make sure you start investing early so you can gift your children the bright future they deserve.