There is a growing urge among parents to provide their children with top quality education. Most of the times, this involves sending them to universities abroad so that the education received is world-class and increases their chances of employability in the best companies and multinationals. It is highly desirable to invest in children’s education so as to make them capable and trained for the world, as also to secure their future and their standard of living. Some of the ways in which parents can save for their children’s education is as follows:
- Purchase a term plan: A term plan which provides adequate cover will ensure that your child will not have to compromise on his education even if you are not around to provide for him. The amount of cover to be taken has to be determined on a number of general factors as well as those that are specific to each customer. You must choose the right term plan and the right cover to get the most apt and suitable benefit for you and your family.
- Invest in Sukanya Samriddhi Scheme: This is a Government of India initiative where you can open an account in the name of your girl child and invest for a period of 14 years till the daughter attains 18 years of age. It fetches an attractive interest rate and is completely tax exempt. It is a perfect scheme for saving for a girl child’s education due to its timeline and security of investment.
- Invest in Equity Mutual Funds through Systematic Investment Plan: Investing in a good equity mutual fund in a staggered manner will generate excellent returns over a 10-15-year horizon. There is no better product than equity to beat inflation and still bring double digit compounded returns. A part of your investment portfolio must have equity if you want to accelerate your returns for achieving a large corpus for any specific purpose, be it education, buying a house, or any other such goal.
- Invest in gold: If you have a well-diversified portfolio consisting of debt and equity, then you must also have gold in your portfolio to hedge against other asset classes. Gold has historically demonstrated an inverse relation with equity markets, and performed well during downturns. Therefore, having a 10-15% allocation towards gold is a good idea to insure your portfolio against risks. It will be much easier to save for your child’s education if you have gold as to balance other riskier assets, which are also necessary to enhance returns.
- Invest in both short-term and long-term debt: Debt products are a great way to get assured returns. For short term needs, invest in short term debt products like short term funds, money market funds, short term FDs, etc. while for long term needs you can invest in instruments like Public Provident Fund which are tax exempt, have government security and generate compounded returns over time. PPF is a perfect product to save for long term financial goals like education.
Thus, it is much easier to provide for your child’s education if you have the right strategy in place and invest wisely.