Education costs are increasing at a never before rate. The additional burden of coaching has made financing education even more difficult for parents. This article is an attempt to help you devise a workable financial plan for your child’s education. You may find yourself in any of the following three categories. Hence, choose the solution based on the category to which you belong-
- When your child is under the age of 10-
Financial planning for child education is ideal at this stage, because you have sufficient time at hand before your kid starts attending college. If you fall under this category, then your financial planning will include three basic steps. First, you start investing in an equity oriented mutual fund, and take the SIP approach of investment. The second thing you must do is raising your monthly SIP value every year. Thirdly, you should try and invest some money in debt funds. This will be for the short term and will meet emergency monetary requirements. This is the perfect formula of child education investment especially when your child is under 10 years of age.
- When your child is in the age bracket of 10-15-
At this stage, you do have time at hand, but not in plenty. So, it’s that phase of your child’s life when you really need to gear up. There are three things you can do. First, invest all your surplus in a portfolio having debt equity funds. The second thing you do is start investing in a portfolio of mutual funds. Make sure that 30-40% of the corpus is in debt funds and the remaining in equity. Regular monitoring of the asset allocation is highly important. As you approach the time when you will need the funds, you should entirely shift the corpus to debt funds. Third thing to do is increase the SIP amount annually, because you are left with less time for gathering the required corpus.
- When your child is in the age bracket of 15-20-
At this age, your child is almost close to his post-graduation life. And hence, you need to gear up before she is done with her graduation and starts looking forward to pursuing post-graduation. So, the time at hand is extremely less. Here is what you need to do-
Put your surplus money in a portfolio having debt funds. The second thing you must do is making SIP investment in a portfolio of mutual funds. Asset allocation is important here. While 60-70% of the corpus should remain parked in debt funds, the remining should go into a diversified basket including balanced equity funds. Make sure the asset allocation is monitored on a regular basis. When the year comes, when you will be needing the money, the funds have to be shifted entirely to debt. But make sure your portfolio doesn’t include small and mid-cap funds.
Don’t forget to keep increasing your SIP amount every year as you don’t have much time left at hand.
By following the guidance above, you sure will be able help your child pursue her dream course, without landing him into financial troubles.