Rather than making investments on
ad-hoc basis, it’s crucial that one puts a plan in place to meet child’s education needs.
The cost of education in India is increasing at a fast pace. From primary to secondary to higher education, parents are increasingly finding it difficult to meet the growing fee structure and other costs associated with education. Aniruddha Bose, Director & Business Head, FinEdge Advisory says, “Education costs are inflating at an above-normal rate, and the returns on your child education fund need to outpace inflation.”
According to National Sample Survey Office (NSSO), between 2008 and 2014, the average annual private expenditure for general education (primary level to post graduation and above) shot up by a staggering 175 percent while during the same period, the annual cost of professional and technical education increased by 96 percent. The expenses typically include course fees, books, transportation, coaching and other related costs.
The cost of providing education in private institutions in 2014 was about 11 times that in government schools, while the cost of higher education from a private institution is about three times that in one run by the government.
According to rough estimates, on an annual basis the education inflation is about 10-12 percent. Even by conservative estimate, if education cost inflation of 6 per cent a year is considered, then an engineering course that costs Rs 6 lakh at present will cost around Rs 15 lakh after 16 years. Similarly, an MBA course that costs around Rs 10 lakh would cost around Rs 34 lakh after 21 years.
Thankfully, for parents whose children are about to join a college or want to pursue higher education, but are short of funds, education loans come to their rescue. However, you should depend on education loans only to bridge the gap between your savings and the actual requirement. So, if your children are still small and have a few years before funds will be needed for them, here’s how you can self fund your child’s education.
Put a plan in place: One needs to put a plan in place by setting up a target amount for child’s education needs. The world is witnessing newer types of courses and it might be difficult for you to zero-in at the career option which your child might take up in the future. Still, to make an informed start, identify 2-3 career options and find out their current cost. Inflate it by considering a conservative inflation of 8 percent per annum for the number of years after which the child would require funds.
Once you have estimated the requirement, find out how much you would require investing each month towards it. Assuming a growth rate of 7 per cent in the above example, you need to put aside around Rs 4,500 per month for the engineering course you child will pursue after 16 years, while it will be about Rs 5,000 per month for doing MBA after 21 years. You may take the help of financial planners to arrive at the figure.
Portfolio: The investment portfolio for child needs, when they are at least ten years away, should primarily hinge on safe investment. Therefore, safe return instruments such as tax free, Govt guaranteed products of LIC OF INDIA.
Ulips with equity fund options can be the mainstay of one’s portfolio. In addition, a LIC's Jeevan Lakshya may also be used to fund your child education needs. “Basically, the key determinant of the ideal asset allocation would be the number of years left for the goal achievement,” says Financial Planner.
Jeevan Lakshya
One may even consider investing through Jeevan Lakshya with the waiver of premium feature to ensure that the child gets the required amount at the desired age. As a parent, ensure you have adequate life insurance preferably through term rider plan so that any unfortunate incident does not derail children needs.
This is a traditional endowment plan which is simple to understand. The plan offers both savings and financial protection for loved ones of the parents. The protection can be further enhanced with the inclusion of two useful riders at a nominal cost. It is a very good cost effective plan offer by Life Corporation of India.
Jeevan Lakshya plan is a combination of both protection and savings.
Tax Benefits- Under the income tax act of 80C the premium paid under this plan is permissible for availing rebate on annual income tax and as per section 10 D the maturity amount is free from tax.
Conclusion: De-risk the funds earmarked for children education remember not to touch the child investment portfolio for any need other than what it has been created for. “Even if you were to pause your monthly saving for a while, do not redeem your goal-based investment to finance other short-term needs” is what FINANCIAL PLANNER suggests. Funding your child’s education is, in fact, one dream you cherished the day your kid was born. Do not, therefore, do anything which stops you from realising your dream.
கருத்துகள் இல்லை:
கருத்துரையிடுக