My wife and I were talking about the education sector’s change over the last 20 years. My wife spoke about the kids’ opportunities to choose from conventional and unconventional courses. We were talking about the changes that the education sector has seen.
I couldn’t help but wonder about the cost differences between my education and today’s kids. What I must have spent entirely on my graduation and post-graduation in the same amount of school fees that is required for kindergarten students for just a year. And it doesn’t stop at this, apart from education what parents and kids seek is the infrastructure and the facilities that an institute can offer, the greater the facilities higher is the fee.
Also with the opening up of avenues, global education is also gaining a lot of popularity, and to help achieve this, a considerable amount of funds are required
One thing is crystal clear higher education is going to be very expensive. But the more pressing question is are we as parents taking steps in the right direction to grow our funds specifically for higher education goals?
Read on to learn more about what you can and should do for your children’s higher education goals.
But first things first. Do we need to worry about the higher education financial needs of our kids since they are in school? This question might arise in your mind, and to answer this let us look at some common facts below:
- Parents are thrusting on the importance of quality education for their children more than ever, but things have changed a lot now.
- The cost of higher education is more expensive than ever, having a rate higher than the rising inflation rate even. 10-12% is the current education inflation rate.
- The cost of school education goes in lakhs per annum, while earlier in times we could do our graduation and post-graduation with such a sum of money
- The cost of higher education courses isn’t the only expense that you need to bear, there is an additional cost of rent, food, lifestyle expenses, travel expenses etc.
- Parents and children both are now seeking quality education overseas, which can cost over 50 lakhs for a three-year program.
- There are a wide range of options available in today’s time, much more than what was available when we used to pursue higher education
Pertaining to the common trends nowadays planning for education well in advance is not only a very prudent step but will also ensure that your child pursues their dream without having to worry about finances.
So, should finances be a cause of your child settling for less? What can be done to ensure that you can provide your children with the best future?
Well, read on to find out.
Recommended read: Be Your Family’s Guardian Angel: Get A Term Insurance
What not to do when planning for your child’s higher education goals?
Before jumping on the essential steps to undertake for a solid financial status for your children’s plans, let us glance over some common mistakes that are made by others while making crucial decisions so that you can avoid them.
- Children’s Insurance= Secured Future
The majority of parents feel they have protected their child’s future by choosing children’s insurance plans. Saving money for your child’s future with a children’s insurance plan is a very ineffective strategy.
- Last-Minute Planning
61% of the parents start the higher education planning at the very last minute. With the rise in the cost of educational courses as well as their wish to go abroad for further studies last-minute planning that starts when your kid is closer to starting college, will definitely not be a best friend to your finances.
- Not Ascertaining total fund requirement
It is imperative that you have an estimation of all the costs and expenses that can arise in the future. Ascertaining the goal at the very beginning will help you maintain a holistic view for the future and simultaneously aid in segregating your finances for investments easily.
- Overlooking Inflation
Another major mistake that parents make is not taking into account the inflation and how that can affect the goals that you set for your children’s higher education goals, marriages, and own retirement. The education inflation stands at about 10-12% currently so map out your goals wisely.
- Real Estate investment for achieving children’s goals
“Real Estate investments will help us when the need arises, be it marriage or education” this is a popular belief held on by most Indian families. In reality, real estate can block in your funds and have lower liquidity which can be problematic when you actually require funds in hand.
Recommended Read: Should You Buy A Second Home For Investment Purpose?
Essential checklist for securing your child’s future
The planning for a strong financial base for our children’s future must be set in place from early on so that finances should be the last thing to worry about when you give your child the freedom to touch the sky and fulfil their aspirations with no boundations. While earlier education could have been financed by a fixed deposit, things have tremendously changed now.
The first thing to keep in mind is that raising children can entail a variety of expenses, according to a report published in ET Wealth, raising a child alone can cost up to 1.05 Crores if you live in a metro or tier 1 city. While education expenses themselves are touching the skies, sadly these aren’t the only expenses that need to plan.
Apart from education, you will also have to take care of insurance and your retirement plans.
- Map out your goals wisely
The first step is to essential map out your goals for the future, which should include having life insurance, building a retirement corpus, saving up for children and marriage, investing in higher education, and other contingencies in life. Having a decent estimate will help you and your family live comfortably in the future.
- Start Investing early
To get the best out of your investments you should start investing early, in order to truly get the benefit of compounding. With most higher education courses in the field of engineering and medicine having courses that can cost lakhs you should be prepared for an eight-figure expenditure considering all expenses for your children. Starting early can help you achieve this figure and with comparatively lesser amounts than others.
- Invest in different asset classes
You should invest in equity mutual funds to help your money grow and attain long-term goals (those that are more than five years away). You can invest in debt and balanced mutual funds for costs you will have for your child within the next three to five years, such as education costs. Since you might need the money in a year or two, there isn’t much time for your investments to develop when it comes to short-term ambitions. It is advised to store your money in a liquid arbitrage fund for such objectives.
In conclusion, it can be understood that universities cannot be financed by an FD alone. To balance the equation, you need a mix of stable instruments like Sukanya Samriddhi (for a girl child) and higher-risk ones.
When it comes to making plans for your child’s education, a mix of term insurance and mutual funds will yield the best outcomes.
Long-term strong returns from equities fund investments will enable you to gradually increase your corpus. Additionally, a term plan is a low-cost approach to ensure the future of the family in the event that something unfortunate happens to the primary provider.
But you do not need to worry about all of this yourself, At SD Financial Solutions we can provide you with sound financial advice that can help you create the perfect outline for your children’s higher education goals. The company’s team is made up of a committed, skilled, and experienced group of specialists. who are committed and diligent in making sure the company’s brand promise is fulfilled.
Book your appointment today and start your journey towards a comfortable life ahead with SD Financial Solutions.
(Saarthi for your dreams)