Every parent often envisions a bright future for their children. Education planning is crucial to ensure that every child receives quality education without any financial barriers. With increasing tuition costs, economic uncertainties, technological advancements, and changing course curricula, education planning is crucial.
According to a report by Edufund, the cost of education in India has been increasing at an average annual rate of 10% to 12%. Thus, securing children’s education funds for the long term is pivotal. The article deep dives into effective strategies to help secure a child’s educational finances, laying a roadmap for long-term stability.
Start by saving early: The journey towards securing your child’s educational finances begins with a well-thought-out plan. Starting early and setting clear goals regarding the type of education parents want for their children will help them stay one step ahead in planning their future. Having a clear vision will help parents chart out a financial roadmap for education
Investing in education-focused savings plans: Education-focused savings plans, such as the Sukanya Samriddhi Yojana (SSY) or education insurance plans, are good options that are tailored to meet the specific needs of financing child education. These plans offer tax benefits along with guaranteed returns, making them an attractive option for parents.
Exploring government scholarships and grants: India offers various scholarships and grants at the central and state levels to support students pursuing higher education. Researching in advance and exploring these opportunities early on to see if the child qualifies for any financial assistance will also be of additional help. For example, the Madhya Pradesh Government initiated the “Ladli Lakshmi Yojana for Girl Child’s Education”. Each state has its financial scholarships to benefit students who want to pursue higher education
Diversifying the investment portfolio: Diversification is key to reducing risks and maximising investment returns. It’s essential to allocate a portion of the investments to education-specific plans and diversify the portfolio with other investment instruments such as mutual funds, stocks, fixed deposits, or real estate.
Teaching financial literacy: In addition to securing financial resources, it’s equally important to impart financial literacy to children. Teaching them the value of money, budgeting, saving, and investing from a young age empowers them to make sound financial decisions in the future. Their decision-making abilities improve as they mature and understand the value of money better.
Setting clear goals and budget plans: Setting up a realistic budget and goals will help create a clear vision of the finances. Parents can bifurcate educational expenditures, among other things.
Monitoring and reviewing regularly: Financial planning for a child’s education is an ongoing process; it requires continuous monitoring and review of expenses and savings. Monitor investments’ performance, reassess goals periodically, and adjust as necessary to stay on track.
As per the Annual Status of Education Report (ASER), around 34% of Indian students drop out of school before completing the eighth grade due to financial constraints. This indicates that planning for a child’s educational finances has become necessary to avoid such difficulties.
Securing a child’s educational finances is a long-term commitment. By starting early, diversifying the investments, exploring available scholarships, and imparting financial literacy, parents can ensure that their child’s educational aspirations are met without financial constraints.
(The author is the co-founder of a school loan company)