Building Future: A Guide To Child Education Planning

As parents, one of our most significant responsibilities is to provide our children with a bright and promising future. A key component of this is ensuring that they receive a quality education. However, the rising costs of education can be daunting. To give your child the best educational opportunities, it’s essential to plan. This guide will explore the crucial aspects of child education planning to help you build a secure future for your little ones.

Everyone works towards common financial goals—like buying a new car or paying for your child’s foreign degree. What’s different is the level of planning involved in achieving these goals. How much money you set aside for each target, how often you reassess your portfolios to check if you are on track, or whether all your goals meet your set time limit—sets you apart from other savers.

7 Important Things To Do For Your Child’s Education Planning

Let’s look at some corrective measures that can help you get back on course and work towards your goals:

1. Check if you have time by your side

You can always delay certain goals, such as a trip to the Bahamas for a few years. It gives you time to accumulate money and execute plans when ready, but some events cannot be delayed. For instance – your child’s bachelor’s degree. It is something that is inevitable and is a defined goal. While you can push back a master’s by a few years, generally, you cannot push back a bachelor’s. You should keep an open mind and consider different alternatives to achieve such goals.

2. Analyze if you can downsize your goal

It works wonders when you put your affordability first instead of your aspiration. Suppose you have always dreamt of giving your child the best education but are falling short of the money required to ensure your child still gets a quality education. In that case, you may change the preference of the college to one that fits your budget/current goal corpus. If your child’s college costs INR 40 lakh, but you can save only INR 25 lakh, you may consider changing the college depending on your affordability.

3. Review if you can increase your investments

As an investor, you always want your portfolio to balance your risk appetite and provide enough returns to achieve your goal. Yet, the market is not as rosy as we may think. When you see you are off-track, try evaluating if you have the opportunity to top up your portfolio. 

A lump sum top-up in a lumpy market often helps you get back on track. It is only applicable if you have time by your side. 

4. Find alternate solutions to fund your goal

It is more applicable to inevitable goals at a specific time in your lifetime, such as your child’s education. Assume you started planning early for your child’s higher education, and your estimated SIP was INR 10,000, whereas you could do only INR 7,500.

The INR 2,500 gap every month will lead to a significant deviation in where you should be vs. where you are in the goal. Let’s assume you have a horizon of 10 years for your child’s college; you will be short of INR 7 lakh for the college fees. You may consider using other financial instruments like education loans to fund your balance.

5. Save more every year

It is an excellent tool to achieve your long-term goals. To save more every year, you can always use the Step-up SIP option to fund your goals. In Step-up SIP, your SIP amount tends to increase by x% (you decide on this x%). Since your income is likely to increase by a certain percentage every year, the Step-up SIP is a great way to increase your goal corpus later in your goal.

6. Study the market impact on your portfolio

When managing your finances, you must understand the factors that impact your money and overall portfolio. While you may have a financial expert whose advice you find trustworthy, you must study and keep yourself updated to ensure you stay on track to achieve your financial goals. 

7. Update your goals and dreams 

Humans are social animals; our needs and wants change with time. As your family grows or your career advances, your priorities will change. You may need a big car because now you have a husband and a child or a larger apartment to have room for everyone. Revisiting your financial goals or dreams can help you determine how much money you need to invest or if you need to upgrade some plans. Consider this, 

Point A: You started saving for your child’s higher education when he/she was born. You do not know the course he/she would choose, and thus, you target an amount of INR X. 

Point B: After seven years, you find your child is good in Mathematics and would want to do a Bachelor in Mathematics from India. Accordingly, you would adjust the target amount for a course in Mathematics.

Point C: After another seven years, you find your child is inclined toward a course in Statistics. Thus, you change the target amount.

Point D: Finally, at admission, your child goes for a course in Data Science abroad, and you need INR Y for the course. 

In the above scenario, if you do not update your goal frequently, there’s a high possibility that you will be off track. Your child’s dreams are not static. As mentioned above, they might want to go abroad for undergraduate graduation, so you must consider currency depreciation and high living costs. Thus, it is crucial to reassess your goals and priorities to set the target to reflect the revised goal.

Bottom Line

As an investor, your job is not over when you start an investment! You must ensure your goals are evaluated and adjusted according to your dreams and market changes and constantly aligned with your financial needs. Additionally, you need to assess your portfolio performance and take corrective action of either increasing your investment amount or horizon (if possible) to meet the goal should you feel that you are not on track to achieve the goal.

Finally, it’s good to remember that you can consult with a financial advisor about even more ways to get back on track and aggressively move toward your goals. If you are looking for a child Education Planning Advisor in Bangalore then have a consultation with experts at Fipro to guide you through the best.