Investing in children’s education? Which education plans to invest in?
Given the rising cost of education, giving your children the best education possible should be your top priority as parents.
By creating early child investing plans, you may prevent your children from having to give up their dreams due to a lack of resources.
In this blog, we will discuss investing in children’s education plans and where you should invest.
Where should you invest in your child’s education plans?
Parents work hard to provide for their children because they are everything to them. When it comes to paying for their school and securing their financial future, prudent investments must come first.
Investing in your child is critical because of the surge in educational prices. The best investment opportunities for funding your children’s education are listed below.
1. Public provident fund (PPF)
Parents still favor Public provident funds even after the government decreased interest rates on provident fund accounts. Public provident fund deposits encourage discipline since you can only withdraw the corpus at the end of the 15-year maturity period.
Because the principal, interest, and total maturity amount are all tax-free, you can develop your corpus for educational reasons.
Because the government backs the Public provident funds, you may rest easy knowing that your money is safe. However, depending solely on PPFs might present a cash flow issue because their official interest rates have already been reduced.
Create a portfolio with higher returns to avoid this. Choose a well-balanced investment plan for your child’s future, including public provident funds and Unit Linked Insurance Plans (ULIPS).
2. Equity mutual funds
Starting equity mutual fund investments when your child is still young, and you have at least 15 to 20 years left until retirement is a terrific option.
You can withstand shocks like volatility and stock market collapses because of this. Equity investment is not for everyone since it requires specialized knowledge and the ability to stay up to date. The wiser choice is consequently to select equity mutual funds.
These are run by experts who know how to pick the least risky stocks while still ensuring that your money increases over time. You might create a portfolio of equity mutual funds specifically for your child’s education. \
You may do this when your child is 4 or 5 years old by opening a child-specific account and selecting Systematic Investment Plans (SIPs) in riskier products like equity mutual funds. Then, you may adopt a more cautious strategy when you and your child become older.
3. Investments in National Savings Certificate (NSC)
The National Savings Certificate, or NSC, is the finest and most reliable way to save money aside for your child’s education. National Savings Certificates with a maturity date of five years may be purchased and reinvested.
At the current interest rate of 8.10%, one may acquire a certificate for as little as INR 100. Section 80C of the Income Tax Act allows for an IT refund on investments made up to INR 1 lakh annually.
4. Invest in debt funds
Debt funds have less risk than equities mutual funds do. Lending money generates interest that is then invested in various bonds or deposits.
Debt funds provide a consistent return on investment as a low-risk investment choice. Debt money can be utilized to cover the child’s ongoing needs, such as school tuition, unexpected medical costs, etc.
Debt fund investments are created for the short term and provide a 6-7% yearly return. Additionally, debt funds are adaptable and permit withdrawal anytime necessary.
5. Fixed deposits
FDs are one kind of investment offered by banks and other financial institutions. After placing a deposit, you receive a fixed rate of interest for a defined period of time.
Fixed deposits provide comprehensive capital protection and guaranteed returns when compared to mutual funds and stocks.
When should you start investing in your children’s education?
Since there are several benefits to starting early, this is the greatest time to start investing. The more money you can eventually offer your children, the sooner you start investing. Since time is your greatest ally, even a small sum saved now will someday develop into a sizeable corpus.
To maximize the profits that will be generated on whatever current investments you make, you should completely take advantage of compounding. It is smart to begin saving for your children as soon as possible.
By doing this, you may ensure that every financial aspect of their life is taken into account. But starting to save is never too late. Even if you begin saving when your children are still little (between 1 and 8 years old), you can save enough cash to sustain them as they become older and their expenses grow.
You may prepare financially for increased education costs, unanticipated diseases, and unpleasant circumstances by putting money into children’s investing plans.
You should begin preparing for your child’s future as soon as you can. The risks involved are spread out, and your assets have more time to grow as a result.
Consult an expert advisor to get the right plan