How much Money do I need to Invest for my Child's Education?

It’s every parent’s dream to provide the best education to their children. However, in today’s time, when the cost of availing quality education is at an all-time high, it’s easier said than done. Therefore, a proper financial planning and investment from the very beginning becomes crucial. Below are the points that will help you in determining how much money you should invest for your child’s education:

When it comes to calculating the amount of money that you should invest to reach a particular financial goal, knowing the investment horizon is very important. It’s the time period for which you will be investing your money before withdrawing it. Calculate the investment horizon based on your child’s present age and the age at which he/she will need the money for his/her higher education.

The next factor that will help you out in determining the amount of money that you should be investing is the corpus that you will require at the time of maturity. In this case, it will be the total cost of higher education of your child.While calculating this amount, consider whether you want your child to study in India or abroad and also, whether you want him/her to study in a government college or a private university.You should also consider the impact of inflation while determining the corpus that you need to accumulate till maturity. In all probability, by the time your child will need the money accumulated by you, the cost of education is going to be multiple times of what it is presently.

Now that you know the amount of money that you need after a certain number of years, you need to factor in the rate of return that you will be getting on your investment for calculating the amount that you should invest. Remember to invest in an instrument which is offering a rate of return which is higher than the inflation rate.After factoring in the above figures i.e. your investment horizon, the amount of corpus that you will require, and the rate of return on your investment, you can calculate the exact amount that you need to invest every month for your child’s higher education using an online investment calculator.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.