Investment Ideas For Your Child's Higher Education
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India as a country is highly focused on its human resource development through quality education and allied services. However, when it comes to pursuing education, a child’s dreams and aspiration should not be limited by financial constraints. Hence it comes down to a matter of responsible financing allowing your child to achieve their goals and aspirations through high-quality education. That being said, high-quality education is usually expensive and would require some degree of financial planning.
In addition to investing in child insurance plans. It becomes crucial to exercise financial discipline when looking to plan out your child’s higher education
When is the Right Time to Start Investing in Your Child’s Education?
Similar to any investment, it always helps to invest sooner than to postpone it for later. That being said, the age of your child will play a crucial role in making this decision. Early investing allows your investment to grow, allowing you more time to save and thereby reducing financial constraints and allowing you to reap the benefits of capital compounding. Alternatively, investing at a later stage will run a greater risk given the shorter time period.
Okay, But What Are The Options in the Market to Start Investing in?
1. Mutual Funds
Since investing in your child’s education is time-sensitive, it is imperative to start investing when your retirement is at least 20 years away. Especially when it comes to mutual funds. Out of all the mutual funds, equity mutual funds tend to give superior returns over a long period of time. That said, the investment in the equities segment is prone to risks.
Hence, starting early allows you to create a cushion for such investment. Since equity mutual funds are managed by professional fund managers who create a balanced portfolio, for investors looking to leverage the power of equity investment, this option is lucrative.
2. Public Provident Funds
This investment is a government-backed fund, thereby ensuring a steady increase in the corpus amount over a long-term horizon. Although the returns are not superior to equity funds, PPFs offer benefits such as tax-saving and guaranteed return on investments. However, interest rates tend to vary on a quarterly basis. This mode of investment also helps to create a sense of discipline if you choose to go for a systematic investment plan, where regular amounts of funds can be invested at regular intervals.
3. Money-back Insurance Plans
These plans are provided by insurance providers and provide policyholders with a dual advantage. That is, it provides the benefit of insurance, where the benefits are given out to the beneficiaries at the time of death, along with an investment element. The investment element, on maturity, pays the policyholder ‘survival benefits’ over a regular period of time.
This allows for policyholders to leverage increased liquidity, that may be used for your child’s education or even investment in other avenues. This payout is generally a percentage of the sum assured provided to the policyholder in the event of death. Additional add-ons or riders may be added to the existing policy to provide cover for specific conditions.
4. Unit Linked Insurance Plan
In recent times, ULIPs have regained popularity as an investment tool. Similar to money-back insurance plans, ULIPs provide a dual advantage. However, it gives its policyholders the advantage of choosing the venue of investment based on their risks. Namely equity, debt or a combination of both. The premiums paid to go partly into the insurance aspect of the fund and partly into the investment, allowing you to enjoy financial gain at the time of maturity.
Although it does not give out regular payouts like money-back policies, it helps grow your corpus via the investment aspect of the fund.
Key Takeaways
Although child insurance plans are a popular and widely accepted way of securing your child's future, it always helps to be aware of other possible tools you may leverage as an investor to better secure their future, especially when it comes to pursuing higher education.
When looking for options, it becomes increasingly important to go through the terms and guidelines in addition to deciding the premium amounts one must pay based on their risk-taking ability. Factors to take into consideration when looking at one risk-taking appetite include the earning capability and future growth of the same. Additionally, planning your child’s dream college can better help you financially plan your education.
That said, any investment must be undertaken with the intent to be disciplined when it comes to paying the premiums and a strategy that may work out for some may not be the one that is best suited to your needs.
Also read: Everything You Should Know About Child Insurance Plan
A Child Life Insurance Plan Can Help Protect Your Child's Future
