Are you saving for your child’s education in the right way?
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Are you saving for your child’s education in the right way?

  • Highlights

  • Education costs can jump to ₹46 lakhs in 15 years

  • Interests up to 8.3% for Sukanya Samriddhi Scheme

  • Stable returns with Fixed Deposits

Costs of living indices are steadily increasing, and so are the costs of education. Making a strategy for your savings can help you maximize your returns and save enough for your child’s higher education too. There are several investment options such as the Sukanya Samriddhi Scheme offered by the government for the girl child. Check out some of the best investment options to ensure your kids receive the best education.

When investing for your child’s future, consider the following factors:

• Decide how much money you need, to meet your child’s education requirements. As per recent surveys, it costs nearly ₹10 lakhs to complete an engineering course, while an MBA can cost more.

• Take inflation into account, as it plays an important role in determining the corpus you need to build for you child. The cost of education can jump to about ₹46 lakhs over 15 years, assuming an 8% inflation.

• Consider the time and amount you’re investing, as they would determine the best investment options that are suitable for you. For example, if you find that you only have 5 years to build an education fund for you child, you may have to pick high-earning but risky options.

• Make an investment after taking your risk appetite into consideration. If you are a conservative investor, you may find that it will take you longer to create the wealth you need, to finance your child’s education. It is best to build a diverse portfolio with low and high-risk options.

Additional Read: Investment Options To Ensure Your Child Has a Secure Future

Here are some investment options thatyou can consider for your child’s future education:

1. Equity based mutual funds:

Though mutual funds are considered risky investments, they do provide high returns. This streak of high rate of interests is expected to continue. Beating other investment options, equity based mutual funds are provide annual returns of above 11%. Another advantage is that gains from investments in equity are tax free, helping youearn higher profits. When you have time on your hands,an equity-based mutual fund investment can become the backbone of your investment.

Best Investment Options

2. Debt equity funds:

In these hybrid mutual funds, 65% of the assets are invested in equity and the balance is invested in debt-based securities. These funds are equity-backed for taxation purpose, and ideal for a conservative investor providing an ideal mix of high returns and safe investment.

3. Sukanya Samriddhi Scheme:

Backed by the Government of India, and developed to provide an incentive to save for the girl child, this scheme allows the parent to open an account before the girl child turns 10. You can invest a maximum of ₹1.5 lakhs a year and can claim a deduction under Section 80(C) for income tax purposes. The investment made and the returns earned from this scheme, are tax free. The investment matures when the girl child turns 18. At present the rate of interest for the scheme is 8.3%, which is higher any other secure investment option.

4. Public Provident Fund:

The Provident Fund scheme provides a similar secure investment option with higher returns and no tax liability on the investment and return.

5. Debt-based mutual fund:

This type of fund invests all the money into debt instruments on the stock market. They are considered the next best investment to fixed deposits as they are secured. Further the returns suffer negligible tax as they are taxed at 20% post indexation.

6. Fixed Deposit:

This is the safest investment option as it gives you a fixed return for a fixed tenor. Further, with fixed deposit investments, you can withdraw the money as required providing liquidity when needed. These days, you can get stable returns on company FDs as compared to bank FDs. Certain financiers provide you attractive FD interest rates.
Making investments in the schemes above will help you create a corpus of funds for your child’s education with ease. Early planning, a clear goal and a diverse portfolio can help you fund your child’s education without much trouble.

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