When Should I Start Investing for my Child's Education?

Every parent wants the best for their child. Especially when it comes to their education, parents are always wanting to be one step ahead. Parents can safeguard their child’s futures if they adopt a proactive approach and invest systematically from an early stage. Thus, financial planning is instrumental to a goal as essential as funding a child’s education.But most parents are clueless about when they should start investing in their child’s education. Let us address this important issue.

Parents should start investing for a goal as fundamental as their child’s education as early as possible. When it comes to any goal-based investment strategy, be it for your child’s education or for your own retirement, the key ingredient is time. The longer you invest, the more you benefit. Let us explain this with the help of an example.Amar and Amira were blessed with a baby girl Arushi. The young parents have always been financially prudent. They started investing for their child’s education since the day she was born in an equity-oriented mutual fund. Amar and Amira could thus buy themselves an investment horizon of 18 years. With an average annualised return of 12% and an initial investment amount of Rs. 2 lakh, they were able to generate Rs. 15.3 lakh at the end of their investment tenure, that is, when their daughter turned 18.Had they not been farsighted in their approach and had started investing after a few years (say when their daughter was 10 years old), they would’ve been able to generate only Rs. 4.9 lakh which is clearly insufficient if they want to sponsor their daughter’s higher education.

Education is one of the most essential and primary needs of a person’s life. Therefore, ideally, it should be as affordable and as accessible as possible. However, receiving a well-rounded education in India comes at a steep price.Parents are finding it increasingly difficult to cope with the high-priced fee structures of schools, colleges, and “extra classes” or coaching institutes. Moreover, a child’s expenses aren’t limited to just tuition fees. Hostel expenses, fees for competitive exams, cost of co-curricular activities are only a few of the many costs associated with providing your child with a well-rounded education.Therefore, if you want to save for your child’s education, there is never a better time that now.

• Since saving for a child’s education fund is a long-term goal, parents must remember to consider the hidden cost of inflation.
• Another important aspect to keep in mind is the taxability of your investment’s returns. Take into account the effective return on investment, which must be adjusted for tax.

In Conclusion Education is the most crucial aspect of a child’s upbringing. Every parent wants to provide their child with the best quality of education. Therefore, invest now for a secure tomorrow.

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.