Mutual Fund: Do you need a dedicated children’s mutual fund to plan your child’s future?

Education planning helps you to make an informed decision about the career choice for your child.

The education sector is becoming increasingly competitive. Education planning has assumed importance. Education planning need not be a daunting task as it is made out to be. A small investment every month can make a huge difference in the child’s future.

The education inflation has risen at a faster pace than normal inflation. The demand for higher education is rising by leaps and bounds every year. The cost of higher education can quickly drain your finances. Nobody would like the cost to become a hindrance to their child’s future. In India, between 2008 and 2014, the cost of education increased by a staggering 170%. In the same period, the cost of professional and technical education increased 90%.

Early investing can help to build a sustainable future for your child. Several new courses have been introduced in recent years. For a parent, it might be difficult to identify a career in the early stage of his child. Ideally, you should identify 3-4 career options and the present cost of education. You can inflate the cost by considering the education inflation of 10% per annum. This will give you an idea of the quantum of funds you might require in the future along with the amount you need to save every month. For example, if your child wants to pursue an engineering course after 15 years, you might require saving Rs 2500 per month.

Education plays a crucial role in enhancing the child’s interest. For someone having modest income educational planning assumes even more importance. If one starts investing early one can accumulate decent corpus to ensure that the children do not face hurdles while pursuing higher education. Many parents break themselves paying for costly higher education.

Investing 5% of income towards education planning is a sustainable goal. The advantage of investing early is that you get the advantage of having time by your side. Investing through a Systematic Investment Plan (SIP) can help you to wade through volatility in the markets. Mutual funds have consistently delivered higher returns in the long term. It helps to manage cash flow during crucial years of your child and also protects your retirement account. Remember your child can get a loan for education, but you cannot get a loan for retirement.

A good education planning can help you to minimize costs in the long run. Most parents are determined to do everything in their power to secure the future of their children. If your education goal is 3-5 years away you can opt to invest in Equity Linked Savings Scheme (ELSS) which can not only help you save for higher education but also provide tax benefits. You can redeem the units as per your needs and remain invested with a balanced amount for capital appreciation.

Education planning helps you to make an informed decision about the career choice for your child. Instead of making ad-hoc investments, you should carefully plan keeping in mind your financial goal and risk appetite.

If you are planning for your child, you must create a separate portfolio for each investment. This will help you to manage the funds in a better way. To make the whole process easier, you can create a portfolio for short, medium, and long term. This will enable you to track your educational goals more efficiently. You must strive to invest regularly and refrain from touching the portfolio for any other need than education. For some reason, if you are unable to continue investment, do not redeem the portfolio in haste. The investments will continue to grow. If you are unsure of financials, you can seek the advice of a qualified financial advisor.

(By Abhinav Angirish, Founder, Investonline.in)