I have planned for my child’s future education expenses.
Read to know-how!
Why do we feel the need to save? Only because we cannot predict the future. I have often heard people saying “live in the present, the future is yet to come”. But can we really just live in the present without worrying about the future? I guess this uncertainty about life is what encourages us to SAVE NOW. Reasons for saving vary from person to person, some might want to save for that dream house or car, or vacation. But as parents, one of our main reasons to save is our child’s education. In today’s rapidly changing world of high inflation managing financial goals is very difficult even for the most educated ones. Today’s education system takes a toll even on well-to-do families. Traditional saving methods are ineffective in today’s time due to the higher cost of living. Saving a good fortune for children’s education is not a simple task.
There are many investment aspects available in the market which tend to confuse us even more. Investment options like Fixed Deposits give very few returns which are inadequate in today’s times. Other options like Equity demand good knowledge and time to get good returns and carry a high risk for less-educated investors like me. Other options like Gold and Bonds are not very lucrative either. Investors like me require something in which a small amount can be deposited monthly and which is secure and gives good returns in the long run.
I started early investing in Mutual Funds which gave me the confidence and power to handle my children’s educational expenses within reach. I started SIP with option growth from the year my children were born and started investing initially with a small portion which I have now increased with time. With the goals of higher studies either in India or abroad, my children should not feel the pinch that I cannot afford to spend on their education.
Inflation In Education
Whether your child chooses to study in India or abroad, educational or university inflation is the real thing – an indicator that will make or break your dreams. This inflation is an indicator of the rocketing educational expenses calculated over a period of time. Over 30 years ago, the school fees would range from Rs 400-500 per year. Fast-forward to 2021, the average expense per month for one student living in the metro cities would be Rs 12,000 – Rs 18,000 per month including transportation, tuition fees, extracurricular activities, etc. In India, education inflation stands at 11-12 percent.
To tap the power of compounding, you need to make investment such that it follows a compound interest system like a Systematic Investments Plans (SIP) of Mutual Fund, and then let it be. As they aim to generate interest or dividends, the profits get reinvested and compound the earnings at a fast-tracked rate.
Example- If you invest Rs. 10,000 at 5% interest for 20 years, you’d earn Rs. 26,532.98 i.e. Rs. 16,532.98 in profit (ignoring taxes and fees). But if you doubled the rate of interest to 10%, how much would you earn? It might seem that doubling the rate would double the return, but that’s not the case. Doubling the rate of interest increases the return by nearly 253.55%. Instead of earning Rs. 26,532.98; you would earn Rs. 67,274.99 i.e. Rs. 57,274.99 in profit.
I have planned for my child’s future educational expenses by investing in L&T Mutual Fund. The most trusted and renowned brand of India is here to help me in fulfilling my dreams for my children. The systematic investment plan with the power of compounding aims to take care of high inflation and huge expenditure a good education demand. The high cost is difficult to manage if we don’t have an idea about the amount of expenditure expected for children’s education for which I used L&T Child’s Education Calculator which is very handy and the best part is that my investment is managed by professionals.
The open-ended mutual fund schemes I think are a good choice because our entry and exit is in our hands. The power of flexibility of SIP and adding lumpsum if funds are available in the combination, I like most.
In the end, I would like to say that analyze your child’s future needs and start saving as early as possible. Choose the appropriate investment plan according to your financial goal.
Always have the habit of reading the scheme related documents before investing to understand the scheme type, investment patterns and the risk factors associated with particular investments and consult your financial advisor to understand the implication of any investment
Disclaimer: This information is for general information only and does not have regard to the particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax, and financial advisors before investing. The recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.