5 factors to consider before investing in your child’s education

The journey of parenthood is wondrous and full of life’s many joys. Watching your child grow right in front of your eyes into a wonderful individual is one of the most rewarding experiences. All the tumultuous efforts and tedious tribunals feel worth the triumph in the end when you see all your planning pay off.

Education plays a very important factor in bringing these endeavors to fruition. Every parent’s dream is to prepare their child for a dynamic future and mothers especially treat this in the highest regard. According to the LXME Women & Money Power Report, 70% of moms are highly involved in their child’s education and 50% of a woman’s key driver for investment is a child’s education.

You can achieve your goal of giving your child the best education by effectively planning and managing your money. Here are 5 factors that you can consider before investing in your child’s education:

Inflation: The rate of inflation is soaring! It simply means that costs for products and services have increased. Education won’t cost what it does today because of this change. Your goal amount will be impacted since it will also increase in pace with inflation. Because of this, it’s essential to factor in inflation of around 8–10% every year while making plans for your child’s education.

Cost of education today: You must first decide what your objective is. Do you have plans for your child’s college expenses, and undergraduate or graduate studies? Do you have any plans to send them to prestigious schools in India or overseas? Which course is most appealing to your child? You can determine the current cost of schooling by providing the answers to these questions.

Time period for your goal: Your child’s age and admission age will help you plan your investment. The earlier you start investing, the better it is. Being a long-term process, it is ideal to start investing in your child’s education when they are born. For instance, let’s say your child is currently 2 years old and they intend to start college at the age of 18 years. Then, the time period of investment will be 18 years – 2 years = 16 years.

Choosing the right option: Your objective, the amount of time you have to attain it, and your risk tolerance are key factors in figuring out the best investment option. If your goal is short-term (less than 3 years), you can look into investment options like debt mutual funds, fixed-rate deposits, and recurring deposits, while if your goal is long-term (over 3 years), you can choose from a variety of long-term investment options like equity mutual funds, equity ETFs, gold bonds, and mutual funds, among others.

You can invest a sizable portion in equity mutual funds to get long-term returns that outperform inflation. A predicted rate of return may be calculated using the options selected. Diversify your portfolio while investing to minimise the risk!

The investment amount: To figure out how much money you will need to invest to provide your child with the greatest education possible, there are several simple calculators accessible. If you have surplus funds, you may invest it as a lump sum, or you can set up a SIP to make regular investments of fixed amounts every month. If the desired amount seems enormous, don’t panic; with tiny, consistent investments, you can make your ambitions come true.

No plan is perfect without constantly adapting and changing to the needs of the hour. Whenever a change in goals arises, make sure to align your plans and investments accordingly. Revisit your plans to ensure you are on the right track.

Begin your journey early on to reap the benefits of compounding!

Priti Rathi Gupta is the Founder & MD of LXME – India’s First Neobank for Women in the making