The Best And Safest Way To Save For Your Child’s Education
“HSBC reported that 70% of Indian parents believe that planning their child's education is the best investment they can make”
There are very few cultures in the world that value Education as Indians do. There is a historical context to this: for the first few generations of Indians after Independence, Education was the only and the most powerful tool to uplift their family from the clutches of poverty and to climb up the social ladder. Culturally as well, it is common in Indian households to worship Goddess Saraswati, the Giver of Knowledge. Due to these reasons, parents in India invest almost everything they have(and they don’t) to ensure their children receive the best possible education. No matter what the financial situation of the house, when it comes to any request regarding education, Indian parents just don't say no. On a more playful note, “I want money for additional tuition” is perhaps the national excuse in the country that every child at least once in their life uses to extort money from their parents.
On a more serious note, if you are an Indian parent then this blog serves a very important purpose. It will empower you with practical tips as to how you can save for their education without having to compromise with their future.
Bad News First: Education in India is getting very expensive
Data revealed by the National Sample Survey Office (NSSO) indicates that the education expense increased 2.75 times in 2014 as compared to 2007-08 whereas the per capita income has increased only 2.49 times during the same period. As per the same data, the average expenditure on primary education increased 3.4 times while in the case of upper primary education it rose by 2.58 times.
To give you a fair idea, the chart below gives you a picture of what it takes to educate your child in some of the most popular courses today and what will be the estimated cost of the same degree a couple of years from now.
To add to this, there are so many additional charges that go into educating your child such as tuition fees, transportation, they may want to hang out with tuition friends or with college friends! With an improved standard of living, your children may not want to study in a Government college. If they aspire to study in private Institutions or if they wish to study abroad, then the costs will increase significantly.
How can you ensure your child doesn’t feel inadequate compared to any of their friends? How can you assure them that when it comes to education, you have all the necessary resources to ensure they flourish to their full potential?
Good News: It may seem like a daunting task but there is a way out. Let us tell you how.
Without a Goal, you will get nowhere
In a world that is evolving so fast, it may be difficult to estimate what kind of opportunities will exist in the world a couple of years from now and what avenues will be open to your child. However, your first step must be to set a goal. You can adjust your goal as there are more developments in the world but you must start with one. The Goal should essentially comprise of two elements: The Target amount and the time within which you want to achieve it.
For instance, if your child is 6 years old and he/she is inclined towards Technical studies such as Engineering then you have roughly 17 Years to save more than 55 Lakh rupees which would be the estimated cost of an Engineering Degree by then.
What to do once your Goal is ready?
In India, Fixed Deposits/Recurring Deposits is generally considered to be the safest and the most popular modes of investing. While an RD/FD will give you guaranteed returns, they will typically be in the range of 6-7%. After deducting the taxes, the effective return is around 5%.
Education costs are growing at roughly 10% and the money you are saving for is growing at 5%. This means you need to invest much more every month to earn the necessary amount for your child.
That is why Mutual Funds are the best and safest mode of investment for your child’s education. With an average interest rate return of around 12-15% that matches the rising cost of Education, it is the best way to move forward.
Ready to start investing? Here’s what you can do next
When it comes to investing there is a classic saying, the best time to invest was yesterday, if you missed that deadline, you must do it now. Remember, every day you delay investing, you are making it harder for your child to achieve their dreams. At the same time the sooner you start investing, the magic of compound interest ensures, the higher is your payout and the more resources are available to your child. Do read our blog here to understand why you shouldn’t waste a day more.
If you download the GlideInvest App, just within a few simple steps as shown below, we will tell you the exact amount you need to invest and get you ready to start investing for your child now.
Step 1 Open the GlideInvest App and open the Goal-Based option. Select Child's Education"
Step 2 Set a Target Amount
Step 3 Choose the number of years in which you want to earn the target amount
Step 4 Choose a lump sum amount you want to invest initially
Step 5 Chose the percentage increase you want on your investment year on year
Step 6 Choose from our Nobel Prize research-backed funds to invest in and your child's dreams are a step closer to reality.
Whether or not you invest in our App, we wish the best for you and your child and may your child make such a difference to the world that all of us feel proud of her!