How to plan for your child's education?q

Posted by Shaheen Shaikh on January 5th, 2020

As a parent, providing the best education to your child is one of the biggest responsibilities. With the ever-increasing cost of education, it is becoming tougher for parents to provide the best facilities to their children. In fact, a report by Times Graduate estimated that the average cost of completing an MBA degree could be as much as ₹60 lakhs by 2025. So, even if you’re a new parent, it’s already time to start checking out personal banking options to begin saving up for education.

Beginning early and being disciplined about financial planning can ensure that you have sufficient funds for your child to follow their dreams. Opening an online savings account and investing in mutual funds and fixed deposits can help achieve your goals.

School education

In the early years of your child's education, the expenses would be limited to school and bus fees. These are generally payable on a quarterly basis. Once your child reaches the higher standards, you may also have to pay for coaching classes.

A great way of planning for such expenses is by opening a separate online savings account dedicated to funding your child’s education. When you choose such an account, ensure that the interest rate is attractive. Some offer interest rates of as much as 7%. This means that your money continues to earn while you save. You could also consider opening a minor savings account online in the name of your child and put away money that he/she receives as gifts. In India, relatives visiting you often give money to your child, which you can be deposited in this account.

There are other personal banking solutions, like a recurring FD or child plans, that can help you prepare for expensive coaching classes for boards or college entrance exams. These allow you to make small investments each month instead of paying a lump sum. You can start with an amount as low as ₹2,000 or go as high as ₹75,000. Apart from helping you save and earn interest, some personal banking solutions offer tax benefits. Do check online for opening a savings account that is linked to these investments.

Higher education

Higher education is what constitutes most in high financial costs. When considering personal banking solutions to prepare for these costs, one must look at options that are meant for long-term horizons. You could consider gold bonds or mutual funds, which have tax benefits too. It’s a good idea to educate yourself about market risks before investing in such products.

At the time of entry into a higher education institute, you could also consider a personal loan or a loan against property. It has become much more convenient to obtain these loans, and one can get a loan from ₹5 lakhs to ₹10 crores.

When investing in longer-term financial instruments, it’s a good idea to use the SIP approach. SIP plans allow you to make small investments at regular intervals, providing you flexibility. You can also take advantage of compounding with such plans.

With so many personal banking and investing options available, there is no need to be disheartened by the rising cost of education. With disciplined planning, saving and investing, it’s possible to support your child with the best education.