Your child’s college education is one of the most important financial responsibilities that any parent should manage. Due to the increasing cost of tuition, it is advisable that parents plan early and make the appropriate decisions. There is more than one way to prepare for this important milestone, from saving appropriately to planning for a student loan.

Plan for Child’s Higher Education: Key Financial and Saving Tips

Understanding the essential components of preparing for your child’s college education is a top priority before going into the many different saving plans and loan options available.

Avoid Losing Your Life Savings

It is important to safeguard your retirement plans. Looking at your life savings and retirement fund, it can be tempting to think of using it all for paying for your child’s education. Such actions may end up costing you greatly in order to secure your child’s future. Instead of using your entire savings, it is more logical to set a portion of it aside for education planning.

Include Your Child in The Process

Make sure to coordinate with your child, which in this case would mean discussing your finances with him. Let him in your plans and how much you are ready to spend for their education. This form of disclosure will assist your child to appreciate the effort and understand the value of working hard to repay you too. Ideally, involve your child so that he is motivated to concentrate on his studies and appreciate the responsibilities he has to shoulder.

Account for Inflation

Bear in mind the risk of inflation’s impact on education planning. As with anything, when one consumes or invests something, the costs trend upward which means that the amount you are saving today might be insufficient for your expenses in the future. To account for inflation along with future education expenses, a planner or financial manager can help craft a plan.

Plan for Child’s Higher Education: Funding Strategies and Loan Options

There are countless ways to funding your child’s expensive higher education. Some of them include a college saving plan, education loan, or scholarships. There are numerous effective approaches to meet your child’s financial needs and ensure their academic success.

Education Loans

Your child can study in an Asian university by securing an education loan. There are many banks and other financial institutions that provide education loans for further studies in foreign universities at reasonable interest rates. One of the biggest features of the education loans is that your child will only start repaying the loan once they begin their work. This means that you as a parent can breathe a little easier when it comes to financial outflows.

Financial Aid, Scholarships, and Grants

Another option available is financial aid. Scholarships and grants are provided to students to lessen the financial burden and these apply for higher studies as well. Though it is rather uncommon to receive a full financial aid, these services are sure to reduce the burden substantially. Most colleges and universities will usually provide this information on these for their respective students so make sure to check what is available to you.

Work-Study Visa

Your child can take a further step ahead and apply for a foreign degree with the convenient work-study visa. This option allows students to work part-time whilst studying which greatly helps with covering expenses. Your child will gain a lot of invaluable skills during work and a fair bit of cash too.

Plan for Child’s Higher Education: Best Investment Options for Parents

While your child can receive loans and other types of financial aid, saving for their education as early as possible is important. Here are some investment options to consider:

Public Provident Fund (PPF)

You contribute Rs. 1 lakh per year for a period of 15 years. This is a government scheme which means it is low risk and has long maternity payout. Spending on your child/child’s higher education would not be an issue down the line compared to other investment vessels where your child/children’s education may not be secured down the line.

Sukanya Samriddhi Yojana

Parents with a daughter can utilize the Sukanya Samriddhi Yojana which is a wonderful saving scheme. Girls are mostly underestimated when it comes down to education and marriage and the government actively tries to promote saving for daughters with this wonderful scheme.

Mutual Funds

If you are looking for higher rewards while being slightly open to risk, mutual funds would be your best shot. These funds do tend to have some risks so can PPF and FD do come in but mutual funds are overall a good investment option if your long term aim is your child’s education.

Debt Funds

While equity funds have the highest risk compared to all,debt funds are the safest choice if as a parent you are highly risk averse but do want utopic returns compared to bonds or fixed deposit funds.

Fixed Deposits (FD)

Even though fixed deposits are relatively safe, the interest rates have made earning from them increasingly unattractive. FDs can still be a portion of your asset allocation, but it should not be the main asset that pays for higher education.

Plan for Child’s Higher Education: Importance of a Will or Trust

While contemplating on your child’s education, keep in mind estate planning. Drafting a will allows a person to distribute his or her assets in a manner they see fit. Having an estate of some decent value can also aid in making the right decision on who gets the assets upon one’s death. A designated guardian coupled with a reasonable inheritance target allows for uninterrupted educational funding after death.

This is a step that comes as a shock to many Indians. Indeed, 90% of people do not have a will and consequently gamble with their children’s future. It pays to be forward-looking and ensure that there is a definite and comprehensive will in place to take the worry out for whoever has to cope when one is no longer able to.

 Plan for Child’s Higher Education: Teaching Financial Responsibility

Lastly, your child should be part of the approach. Financial luxury should be taught as early as possible. Show them how to use pocket money and teach them the importance of saving. This will cultivate in them considerate spending habits which will help them greatly as they progress through higher education.

Final Thoughts on How to Plan for Child’s Higher Education Effectively

Higher education for your child is not something that should be left for later. An early start to saving, investment in various pillars of finance, and making the child part of all the steps would ensure a better life later and less financial burden.

Categories: Personal Finance Management