Here’s How You Can Save and Invest for Your Child’s Education

The cost of education across the world is constantly rising. There is a sharp spike in fees, which has put parents under worry. Every parent only wants the best education for their child and in order to provide the same, parents need to start planning early. The cost of education is only going to increase in the coming years and it is important for parents to save and invest for the education for their child.

Start early

In order to achieve long-term goals, start saving early. The sooner you start, the higher your returns will be. If you start saving when your child is three years old, you will have enough time to save up for the university education. If you start when the child is ten, you will have a shorter period to achieve your goals.

Right investment choices

The second step is to make the right investment choices in order to ensure higher returns in the long run. There are a number of investment options in the market. It is important to understand the risk-return ratio and the tax implication of every investment before making a decision. Mutual funds (MFs) are considered as a long-term investment with higher returns and balanced risks. The fund is managed by the fund manager who diversifies the risk by investing in a mix of debt and equity instruments. During the early stages of your MF investments, it is advisable to have more exposure to equity instruments and less exposure towards debt funds. However, when the time to utilize your investments is nearing, it would be better to shift from equity to debt-based investments in order to protect your investments. It is important to remember that restricting yourself to equity investment will be riskier since stocks are impacted by the volatility of the market and if the market goes down, the value of your investment will decrease.

Consistency

It is important to remain consistent when it comes to investing for long-term financial goals. You can set up a Systematic Investment Plan (SIP) and invest in MFs. The systematic plan will ensure that a particular amount is regularly saved and invested from your monthly income. In the long-term period, these monthly SIP investments will lead to a larger corpus.

Tenure

When investing for a long-term goal, it is advisable to remain invested for a longer duration. It does not make sense to invest in an instrument for a period of one or two years, as you will have to compromise on the return and you will also have to pay a penalty or exit load when withdrawing the amount. Hence, long-term investment is the key to achieving the long-term financial goals.

When saving for your child’s education, it is important to consider the impact of inflation on the investment. You can increase the amount of SIP each year as your income grows. Additionally, you should constantly track your investments to remain abreast with the returns on the same. Choose the right financial plan based on the amount you wish to invest and the period you plan to remain invested for. Set a long-term goal and start early in order to ensure that you can provide for the education of your child without any hurdles.

 

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