When Should You Start Planning for Your Child’s Education Fund?

One of the key objectives that burdens most parents is providing their children with the best education they can afford. In India and overseas, as education costs rise for primary schooling, further education, and special courses, financial planning for your child’s education often becomes a long-term process. Starting early in the planning for your child’s education fund is key, and it becomes more straightforward the earlier you start planning. But when should you start planning for your child’s education fund? Let’s find out together.

Why Is Planning Early Important?

Education is one of the largest outgoings in a family’s expenditure and cannot be postponed like other goals you have in life. At some point, your child will turn 18 and start college, whether you are ready or not. When you begin planning early in your child’s life, that time and accumulation of small, consistent investments will compound into a sizeable corpus over the 18 years.

For example, if you start today while your little one is still in diapers and save ₹5,000 a month for 18 consecutive years at a 10% average annual rate of return, you would accumulate ₹20 lakhs plus. On the other hand, if you started saving at age 10 and continued investing the same amount for the same time frame, your corpus would be around ₹8 lakhs, less than half of what your starting investment would yield. Clearly, time is on your side.

The Right Time to Start

The best time to start saving for your child’s education is right after they are born- or earlier, if you are just starting your family. This, of course, gives you the most years to save and invest smartly.

But do not panic if you didn’t start early. Start where you are today. The main thing is to understand how much you may need and start working backward. First, guess how much it currently costs for your child to go to college (take engineering, medical, or MBA programs, for example) and add an estimated annual inflation of 8-10%. You will see that what may cost your child ₹10 lakhs now may easily cost ₹25-30 lakhs in 15 years.

Smart Approaches to Creating an Education Fund

1. Systematic Investments

You can use products such as mutual funds, SIPs, PPF, or Sukanya Samriddhi Yojana (in the case of a daughter), which not only provide decent returns but also help you maintain discipline.

2. Insurance plans- and investing in insurance

Child plans offered by insurance companies have a safety net, even if the worst happens and something disrupts that perfect plan for your child, their educational fund remains intact.

3. Diversification

Don’t rely just on one vehicle. A combination of equity for growth, debt for stability, and government schemes for added safety allows you to judiciously manage education funding.

What to Do If You Are Not Fully Funded?

Despite best efforts, there may be times when you are not fully funded for your child’s dream college. At this point, you may consider two financial options that can be helpful: a personal loan or an education loan. Additionally, using a credit loan app can make the process of applying for and receiving funds faster and more convenient.

• Education loan: These loans are specific to higher education funding and can cover a variety of expenses, such as tuition, living expenses, and travel expenses (in the case of studying abroad). They typically will only require repayment once the course has been completed, allowing children time to secure jobs after graduation.
• Personal loan: If an education loan does not cover all expenses or is unattainable for some reason, parents sometimes take out personal loans. Personal loans are flexible and provide covered tuition and living expenses; however, they typically have shorter repayment terms and higher interest rates than education loans.

While this is generally the exception, these two might provide the flexibility needed for your child’s dream not to be compromised by finances. For families seeking quick financial support, a personal loan in Mumbai can help cover education-related expenses without long delays.

Striking the Balance of Present vs. Future

It is understandable for parents to feel overwhelmed about investing a significant amount of money in education while also managing daily expenses and other life goals, such as saving for retirement or buying a home. The key is taking small steps and scaling up. Even a small monthly savings plan, gradually increased by your salary increases, can make a significant difference then.

Overall, planning for your child’s education is not just an investment of money but also an investment in opportunities, certainty, and confidence in the future.

Final Thoughts

When is the best time to develop an education fund for your child? The sooner you can begin to think about it, the better! If you get started early, over time, by investing wisely and making regular investments, the burden of having to scramble at the last minute or taking on too much debt shouldn’t be a problem. Even if education funding falls short of your children’s needs at the last minute, you will most likely qualify for a simple education loan or personal loan to cover shortfalls.

Your child’s future demands forethought. Start now, and let the time work for you.