1. Start early:
Now you will think how advance planning is going to help your child’s education. Let us take an example, consider the cost of higher courses is 50,000 per annum, plus the hidden costs. The same course fees 15-18 years down the line will cost around 2.5 Lakhs per annum as inflation goes on increasing. Now multiply with number of years course duration will be. You will get the cost that you have to provide for your child’s education at that time. If you do not plan for this cost early then you will have to get under the mountain of loan, which will affect your savings for your retirement at that time, and also your other financial needs.
2. Know how much to invest?
Generally we don’t have the idea that how much we should invest to get the target amount for child education. For this you can do the calculation by using the following:
Contribution required per month =
[Target Amount * rate of Interest] / [(1+ rate of Interest) * { (1+ rate of Interest) ^ (tenure*12) - 1 }]
3. Where to invest?
Now you have calculated the amount you need, and the contribution you have to make per month to achieve that target amount. Question arises where to invest? Every individual have different risk appetite and knowledge and depending on that he can choose different investment products through which he can generate returns. Invest only if you understand the investment avenue, you are opting for and review the investment performance regularly. Some of investment option available are PPF, mutual funds, NSC, Equity Mutual funds, Direct Equities, bonds.
