Invest early to build fund for child education

Education has become quite expesnive in India, especially the higher eductaion. Fees for engineering courses are in the range of Rs 12-20 lakh, and medical courses in the range of  Rs 30 lakh-1 crore. And mangement courses cost upwards of Rs 25 lakh.

These are the present cost and if you are planning for your child’s education 15 years down the line, then you need to starting planning and saving for it rightaway.

The report of the Ministry of Statistics shows that between 2012 and 2020, inflation increased at the fastest rate in the field of education. Inflation of food articles was 9.62 per cent, health care inflation was 8 per cent. Compared to these two, education inflation was the highest at 10 per cent.

There are different types of expenses that will be incurred by the time your child will complete his education . Tuition fees increase every year, transportation expenses are also a factor.
And if you go to study in another city away from your home, then add the cost of living. So, the cost of education is not decided only by the fees of the institute and the courses.

Start early
Fee Only, Investment Advisor, Amit Kukreja says that higher education of children is an important goal of parents. For this, saving money is not enough, it is also necessary to invest. The more time you give to this investment, the better the scope for returns. Amit recommends investing in equity and debt mutual funds  because if the investor has more than 8-10 years, then, in such a time frame, mutual funds generally have a track record of annual returns of 12-14%.

Choose the fund
Based on how much time you have, understand how you should choose mutual funds. If you have less than 5 years, then invest in debt mutual funds and balanced advantage funds. If there is a time of 6-7 years, then large cap mutual funds and index funds will be good. if there is a time of up to 10 years, then multi cap and flexi cap funds are a good option in addition to large caps.

If you take a SIP of 10,000 rupees every month, then, assuming a return of 12 percent, you will deposit a total of 6 lakh rupees in 5 years. Your return will be  8,24,864 rupees i.e. a profit of  2,24,864 rupees. But if you invest the same 10,000 for 10 years, then the total investment amount will be 12 lakh rupees and the total return will be 23,23,391 rupees. This means you will higher return of 11,23,391 rupees.

Therefore, it is important that when the child is young, investment should start earlier, so that you can create a large corpus and beat inflation.