Education is a critical component in bringing these endeavours to fruition. Every parent’s dream is to prepare their child for a dynamic future, and mothers especially value this. According to the LXME Women & Money Power Report, 70% of moms are very involved in their child’s education, and education is 50% of a woman’s key driver for investment.
You can achieve your goal of providing the best education for your child by effectively planning and managing your finances. Before investing in your child’s education, consider the following five factors:
Inflation: The rate of inflation is rapidly increasing! It simply means that the prices of goods and services have risen. Because of this change, education will no longer cost what it does today. Your goal amount will be influenced because it will rise in tandem with inflation. As a result, when planning for your child’s education, you must account for annual inflation of around 8-10%.
Today’s education costs: You must first determine what your goal is. Do you have plans in place for your child’s college expenses, as well as undergraduate or graduate studies? Do you intend to send them to prestigious schools in India or abroad? Which course appeals to your child the most? By answering these questions, you can calculate the current cost of education.
Time frame for achieving your goal: The age of your child and the admission age will help you plan your investment. The earlier you begin investing, the better. Because education is a long-term process, it is best to begin investing in your child’s education as soon as they are born. Assume your child is currently two years old and plans to begin college at the age of eighteen. The investment period will then be 18 years minus 2 years = 16 years.
Selecting the Best Option: Your goal, the amount of time you have to achieve it, and your risk tolerance are all important factors in determining the best investment option. If your goal is short-term (less than 3 years), you can consider debt mutual funds, fixed-rate deposits, and recurring deposits, whereas if your goal is long-term (more than 3 years), you can consider equity mutual funds, equity ETFs, gold bonds, and mutual funds, among others.
You can invest a significant portion of your portfolio in equity mutual funds to achieve long-term returns that outperform inflation. Using the options chosen, a predicted rate of return can be calculated. Diversify your portfolio when investing to reduce risk!
The amount invested: There are several simple calculators available to help you determine how much money you will need to invest to provide your child with the best education possible. If you have extra money, you can invest it all at once or set up a SIP to make monthly investments of a fixed amount. Don’t be concerned if the desired amount appears to be enormous; with small, consistent investments, you can make your dreams a reality.
No plan is perfect unless it is constantly adapted and changed to meet the needs of the moment. When your goals change, make sure to adjust your plans and investments accordingly. Check your plans to make sure you’re on the right track.
Begin your journey as soon as possible to reap the benefits of compounding!
