How to Do Child Education Planning?

Every parent wants to provide the best education for their child. However, with the rising cost of education, child education planning has become more important than ever. Parents may struggle to fund their child’s higher education without a well-structured financial plan which leads to financial stress or reliance on loans.

By following a systematic approach, you can ensure that your child’s education is financially secure while maintaining your overall financial stability. This guide will help you understand the key steps to effective financial planning for child education.

Assess the Future Cost of Education

The first step in financial planning for child education is estimating the future cost of tuition and related expenses. Consider the following:

• Current Tuition Fees: Research the cost of education at different institutions (school, college, or university).
• Education Inflation Rate: Education costs typically increase by 6-10% per year.
• Additional Expenses: Accommodation, books, technology, travel, and extracurricular activities also add to the cost.

If you want to calculate your Child education planning or any other financial planning, try our Education Planning Calculator.

Choose the Right Investment Plan for Child Education Planning

The earlier you start investing, the more you can benefit from compounding returns. Depending on your child’s age, you can select different investment strategies:

Short-Term Investments (If Your Child is Above 14 Years)

Since it is already late to execute the plan, we cannot afford much risk at this point of time. Hence, we recommend investing in less risky options to achieve our goal.

• Fixed Deposits (FDs): Offer stable returns but may not beat inflation.
• Debt Mutual Funds: Provide moderate returns with lower risk.

Long-Term Investments (If Your Child is below 14 Years)

Since we have plenty of time to execute the plan, we can afford investing in risky options and create wealth on compounding returns. Hence, we recommend investing in a mix of risky and moderate risky options to achieve our goal.

• Equity Mutual Funds & SIPs: Ideal for higher growth, equity mutual funds offer the power of compounding for long-term wealth creation.
• Index Funds & ETFs: Low-cost, diversified investment options.
• Public Provident Fund (PPF): A safe, long-term investment with tax benefits.
• Education Savings Accounts: Plan like Sukanya Samriddhi Yojana (India) offer tax benefits.

Pro Tip: Use a Systematic Investment Plan (SIP) to invest small amounts regularly and benefit from market fluctuations. If you’d like to learn more about smart investment strategies, feel free to reach out to us.

Smart Strategies for Child Education Planning

Here are some strategies that will help you build a robust financial plan.

• Invest in Mutual Funds & SIPs
• Choose child education-focused mutual funds for goal-based investing. Eg: Children Funds
• Account for inflation and the rising costs of higher education based on region, location, and college.
• Also calculate costs for education for specific studies like engineering, medical, architecture, commerce, etc.

Explore Scholarships

While savings and investments are crucial, scholarships can also help bridge the funding gap. Scholarships & Grants: Encourage your child to apply for merit-based and need-based scholarships like the National Means-cum-Merit Scholarship (NMMS), CBSE Merit Scholarships, and state-specific grants.

Regularly Monitor and Adjust Your Child Education Planning Strategy

Financial planning is not a one-time process. You should keep the below points in mind to keep your financial plan under check.

• Review your investments annually to check their growth.
• Adjust your contributions based on inflation and income changes.
• Rebalance your portfolio as your child’s college years approach (shift from equity to safer investments).
• Connect with your Financial Advisor to build a robust strategy and rest assured that your financial goals will be met.

Conclusion

Financial planning for child education requires early action, disciplined saving, and the right investment choices. By estimating future costs, choosing the best investment strategy, and leveraging scholarships or loans, you can ensure a secure financial future for your child’s education.

Start planning today to give your child the best education without financial worries! Get Started.