Giving your child a quality education must be at the top of the heap in terms of your own life goals. This is a priority and cannot be postponed when the need arises and hence you should plan early on. Inflation is the actual worry which you have to combat and the rate is higher in terms of educational costs, particularly for pursuing higher educational courses at reputed institutions in the country and abroad.
You should always assume an inflation rate of 10% when planning for your child’s education several years down the line. As a result, you should have clearly defined goals, i.e. when you will require the funds. The timelines for paying off course fees and other costs are important since you can plan out your finances accordingly for meeting specific targets. You should start off as early as possible in order to prepare well for your child’s higher educational needs. You can benefit from the power of compounding only if you start early enough. You can also invest in equity which gives better returns with a marginal level of risk. Starting early also gives you ample scope with regard to tackling other unforeseen situations like medical emergencies and employment troubles that may require dipping into additional funds.
Refrain from being over-enthusiastic whenever markets start rallying at any given point of time. You should always track your investments in equity and mutual funds since they will always have an element of risk attached to them. You may also shift investments from equity and other products to bond based funds with lower risk levels at times. You should gradually shift from high risk to low risk investments with the passage of time.
You should keep yourself insured with a term policy. This will ensure that the child can complete his/her education in case the sponsor is not there anymore. Do away with life insurance policies which offer lower returns or fixed deposits which have lower returns as compared to other investments. In case high risk investments are not your thing, you should invest in options which are tax free like PPF or even Sukanya Samriddhi Yojana for girl children. However, prior to investing, make sure that your financial goals and timelines are in sync with these investment avenues.