A child’s aspiration keeps evolving throughout their childhood and is shaped by their experiences, learnings, and the environment that they are brought up in. At the age of five, your child may think of becoming a pilot that may subsequently change to becoming a scientist when they turn ten. By the age of fifteen, the animation may sound exciting to this teenager.
Whatever be the aspirations and however fickle they may sound, you will still want to plan well ahead of time. Some may want to buy the best child plan, while some may want to open an FD for their child. In the last two decades, several private universities have also come up across India and offer quality infrastructure, academic delivery, and a good learning experience. But these coveted degrees come at a cost. Even government-backed institutions are no longer as affordable as they were in the last century. If your eyes are set west, the costs would swell into crores.
In another unfortunate scenario, if you are not even around in the future to support your child’s career, who will help them realize those dreams that were nurtured all these years. In a hypercompetitive world where there is fierce competition for opportunities, a lack of quality education would be a major and permanent setback.
The best way forward would be to start investing early and do it systematically over the planned period. Investing in the right instruments that give you the required amount, at the right time along with the peace of mind is quintessential. The 5 steps listed below can help you navigate this path with ease.
1. Start With 10% of Your Income
If your child is 3 years old and needs money by the time they turn 18, you have 15 years to build a corpus. Allocating 10% of your income for this goal every year should be enough to start preparing for an uncertain future. So, if you are earning Rs.10 lakhs per annum, you must keep aside at least Rs. 1 lakh per year. This regular saving will give you a cushion to start with. If you can allocate a higher portion of your income, it will be even better. At an 8% interest rate, you will end up building an education kitty of close to Rs. 30 lakhs by the time your child is ready to enter University.
2. Learn About Her Educational & Career Interests
Childhood dreams keep evolving and take shape by the time the child enters the teenage years. To help them make the right decision, you must expose him to a wide variety of opportunities right from middle school. Let them write for magazines, learn to code, play basketball, and even start an entrepreneurial venture.
By trying different ideas, their margin of error, in decision making while pursuing a career, would considerably taper down. Closely observing their inclination, passion and aptitude will give you a direction to work on a specific financial goal. For example, if they are an aspiring filmmaker you may evaluate options of admission to Vancouver.
3. Explore the Possible Scholarship Opportunities
Scholarships are a great way of reducing financial stress especially when you are applying to expensive private universities in developed countries. For the vast majority of research-based programs, Universities offer generous tuition waivers and teaching assistantship opportunities.
a. Non-Returnable Educational Grants
Closer home, you can apply for scholarships by multiple educational and enterprise trusts. Most of the scholarships offered by such foundations are grants that need not be repaid.
b. Interest-Free Loans from Educational Foundations
Interest-free loan scholarships are also very attractive because you end up saving interest on education loans availed from Banks. Few educational foundations offer such loan scholarships for post-graduate studies.
For example, on an education loan of Rs. 30 lakhs, repayable at a 10% interest rate over 10 years, you will have to pay Rs. 18 lakhs as interest. If you avail of an interest-free loan scholarship of Rs. 30 Lakhs, you save a neat Rs. 18 Lakhs
|Amount Spent on Education||Rs. 30 Lakhs|
|Amount Spent on Interest||Rs. 18 Lakhs|
4. Buy the Best Child Insurance Plans
If your child is admitted to a 4-year BE degree program at a prestigious private technology institute, you will need approximately Rs. 25 Lakhs to be paid over 4 years. So how do you fund your child’s dream without straining your finances?
Investing about Rs. 1 lakh each year for 15 years can fetch you a cumulative return of approximately Rs. 25 lakhs. The 1 lakh that you invest each year is deductible from your taxable income, under section 80C of the Indian Income Tax Act.
The maturity value received from the child plans is also exempt from tax. Canara HSBC Oriental Bank of Commerce Life Insurance provides the following child education plans you can meet your child’s goals with:
- Invest 4G ULIP Plan
- Guaranteed Savings Plan
- Smart Junior Plan
One of the best features of the child plans is that they also provide financial protection to the child’s goal in case of your untimely demise. In case of your early demise, the insurer can continue investing on your behalf and provide the intended maturity value to your child.
5. Revisit & Revise the Investment Every Few Years
In the initial years, you must aggressively invest in equity funds that can hasten wealth creation. For example, in the Invest 4G plan offered by Canara HSBC Oriental Bank of Commerce Life Insurance, you can specify the exact % allocation to either equity or debt.
Periodic rotation helps you take advantage of market movements and keep your portfolio working in all conditions. In case you are looking for guaranteed maturity value, Guaranteed Savings Plan is a perfect choice.
The key, however, would be to continue increasing your investment as your income grows to maintain the ratio of income to savings. This will help you not only build a better corpus but also meet any unexpected demands in the future. The 5 steps mentioned above will enable a clear thought process and let your money grow while you focus on the apple of your eye!