How to plan for your child’s financial future?

A wise mom once said, “Your child will build castles in the air; you better start buying bricks for the castles today”. Loving your child is what comes naturally, but as a responsible parent you have certain obligations towards your child. Getting a child education plan is one such obligation. If you are reading this, you’ve already proved that you are a concerned parent, finding ways to secure your child’s future.

 A child is always a bundle of joy. Right from the time they come into your life till the child is all grown up and independent, your child is your pride and joy. You give your child the best possible care when he/she is an infant, send him to the best schools and colleges and want the best future prospects for him/her.

 Caring for a child, though delightful, involves expenses. Whether you are nurturing your infant or paying for his/her school and college fees, you have to spend money. If you want your son/daughter to have a bright career, you have to devise a financial plan for your child’s future. Higher education requires money and given the current costs, the requirement is quite considerable.

 So, how do you plan for your child’s financial future? You invest, don’t you?

 While your investments might yield you a considerable corpus to provide for your child’s future expenses, what would happen if you face premature death? How would you secure your child’s future then?

 A child insurance plan comes into play in these situations. The plan provides an avenue of investment for your child’s future and also guarantees the promised corpus even if the parent dies prematurely.

 Need for a Child Education Plan

 1.       Rising Education Costs in India requires a disciplined approach towards savings for your children’s education goals.

2.       As a parent, you also need to consider Premature Death as a hurdle towards this sacred goal and ensure your education plan does cater to this risk.

3.       When you have not planned for your children’s education, loans could be the only option. While investments can help you earn interest, loans would rather levy interest which needs to be paid by you.

4.       Since Children’s education is a sacred goal, this should not be utilized in-case of any emergency and should be designed in a way that it caters only to the milestone payments for your child’s education.

Rather than making investments on ad-hoc basis, it’s crucial that one puts a plan in place to meet child’s education needs. The cost of education in India is increasing at a fast pace. From primary to secondary to higher education, parents are increasingly finding it difficult to meet the growing fee structure and other costs associated with education the cost of higher education has to beat the inflation so that the saving corpus will be effective for the future education needs.

According to National Sample Survey Office (NSSO), between 2008 and 2014,the average annual private expenditure for general education (primary level to post graduation and above) shot up by a staggering 175 percent while during the same period, the annual cost of professional and technical education increased by 96 percent. The expenses typically include course fees, books, transportation, coaching and other related costs.

If you go for a rough calculation according to survey the cost of education inflation is 10 to 12 %.So for example if now engineering costs 5 to 6 lakhs, In future the normal seat will cost 15 to 16 lakhs and for MBA also the same scenario prevails.

If you plan for overseas higher education now, it costs minimum of 25 lakhs in reputed low ranked colleges down the line the cost will be running in to crores

In our next blog we can discuss in detail about child’s financial plans and investments

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