HOW CAN YOU AFFORD ESCALATING COLLEGE EDUCATION COSTS FOR YOUR CHILDREN?

Providing the best resources for their child is every parent’s dream and ultimate goal in life. This includes the escalating prices of education – right from pre-primary to universities. A good education is perhaps the most useful and sensible gift you can give to your child. Most of the parents are able to afford the pre-primary, primary, and secondary education of their child from their pockets and salary. However, it’s the escalating higher education expenses that worries them the most. What makes it worse is the increasing demand along with cut-off to land in a good university. As a result, a lot of parents consider private institutions and colleges to ensure quality education for their child. However, this comes with a considerably higher cost to the parents. The situation worsens if you are looking for foreign education. So, how should one plan for this expense? This article aims at helping you save the desired amount for your child’s higher education expenses.

How much to invest? -You might consider working backwards. Evaluate the various costs of universities, living expenses, food, travel, etc. With the world observing fresh courses being added every now and then, it might get challenging to predict what your child might pursue when they grow up. So it’s always suggested to take at least two to three career options to determine their current cost. Do not forget to inflate it by considering a conventional rate of inflation at 6-8% p.a. for the investment horizon.

When to invest? – When planning to save for your child’s bright future, it’s important to get at it as soon as possible. The best time to start saving for your child’s future is probably right when you are expecting a child or a few years after your child is born. Remember, the greater the investment horizon, lesser the amount you have to allocate each month to your child’s higher education fund. So start as early as possible.

Where to invest? – Choosing the right investment product is probably as important as saving the right amount for your higher education fund. Since, you have a higher investment horizon, you might consider investing in mutual funds that have an exposure to equities. Equities have the potential to generate significantly higher returns over a period of time. What’s more, the volatility associated with equity investments tend to lower when invested for a long duration. You might also consider to invest in mutual funds via a systematic approach, known as SIP. Systematic Investment Plan (SIP) is a mere investment tool and not an investment product in itself. SIP investments helps to automate your savings and invest regularly in your desired mutual funds scheme for the entire investment horizon.

Essentials: To better manage and control your finances, consider making a separate portfolio for your child’s needs. In case, you have you more than one child, allocate funds accordingly and separately. Track these mutual fund investments closely. Happy investing!