How to Invest Towards Children's Education Goals?

The price of education is already exorbitant and is increasing by 10% to 12% a year. One of the biggest financial commitments that families must make is for their children's education. Currently, a four-year engineering programme costs about ₹ 6 lakhs. The cost is probably going to reach ₹ 12 lakhs in six years. An engineering degree would cost ₹ 24 lakhs by 2027.

Students are now being forced to enrol in more expensive programmes due to the increased competition for admission to reputable government-run institutions. Continue reading to know how to begin investment planning for children's education.

To evaluate the risk-return parameters of any investment against specific objectives, it is crucial to carry out some fundamental study before choosing the best investment plan for children's educational ambitions.

For example, if inflation remains constant at 6% annually, an engineering degree that costs ₹ ₹ 5 lakhs today will cost roughly ₹ 12 lakhs in 15 years. If there is no inflation, saving just ₹ 1000 per month over 15 years at an anticipated annual growth rate of 12% will yield ₹ 5 lakhs. With inflation taken into account and a 12% annual growth rate, a person would need to save about ₹ 2,500 per month to reach their goal of ₹ 12 lakhs after 15 years.

1. Investments in Mutual Funds

Young parents should think about making investments in equity mutual funds for their children's schooling ambitions, which should be at least 7 to 8 years in the future. Building a portfolio with regularly performing investments, such as large-cap and mid-cap funds, is a wise investment decision. 

Index funds can potentially receive a share of the investment. Further, Solution Oriented mutual funds help attain a specific goal, such as a child's education planning.

2. SSY or Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is open to those who have girls under the age of ten (SSY). One can open two accounts under the SSY programme. You can open a Sukanya Samriddhi Yojana account at a post office or a bank. One must deposit a minimum of ₹ 250 to open this account.

The annual deposit limit increases to ₹ 1.5 lakhs, with at least ₹ 250 every year. One should keep depositing into an SSY account for the first 15 years after opening one. As a result, if a child is currently 6 years old, the SSY system will be complete when the child turns 27 years old.

3. PPF or Public Provident Fund

Investors can open additional PPF accounts for their children if they already have an account in their name. However, the annual investment limit for it is ₹ 1.5 lakhs. One can open a PPF child account in their child's name.

Under Section 80C of the Income Tax Act of 1961, the principal invested in PPF is entitled to a deduction of up to ₹ 1.5 lakhs every fiscal year. Investments made in one's own and one's children's accounts are eligible for tax exemptions.

4. WOP (Child Plan With Waiver of Premium)

One may also consider particular life insurance plans with a waiver of premium (WOP) add-on when investing in children's educational expenses. A life insurance policy's waiver of premium provision assures that the coverage will remain in effect even in the event of the policyholder's death or inability to pay the monthly premium.

The insurance provider covers the sum assured and continues putting premiums into the plan on time as part of the benefit. By doing this, the fund value will certainly be secure when it is time for the child to start school.

5. Gold ETF

Many parents opt to use gold investments to save money for the educational ambitions of their kids. However, investing in Gold ETF or gold exchange-traded funds is a more economical way to do so. 

Gold ETFs are comparable to purchasing mutual fund units in representing paper gold. These units are traded on NSE or BSE, with gold serving as the underlying asset. For long-term asset accumulation, one can also regularly purchase gold for as little as 1 gram.

Parents thinking about investment can consider the above-mentioned investment planning for children's education to maximise their savings. To support the child's educational objectives, one can create a PPF account and purchase Sukanya Samriddhi Yojana while investing in equity mutual funds. 

It is crucial to take into account variables like taxation and liquidity when investing in gold through ETFs and SGB. It is equally crucial to keep saving regardless of market conditions and to refrain from transferring money set aside for children's educational aspirations.