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How to Plan Your Child's Education - A Step-by-Step Guide

Planning for your child's education fund is a long-term financial goal. Know the step-by-step guide to plan and build funds for your child's education to help them fulfill their dreams.

  • 4,934 Views | Updated on: Jan 10, 2024

Starting early is the key to building a significant education fund for your children. Along with an early start, diversification of your investment portfolio is also essential so that you do not miss out on the financial goals you have set for your child’s education planning. The sooner you start investing in your child’s education fund, the larger the corpus will become and help your child fulfil their dreams without financial woe.

Easy-to-Follow Steps to Plan your Child’s Education

Planning education finance, especially for your children, can be a challenging task and, at the same time, a highly tricky move. You are unaware of various factors that might influence the education of your little one in future years. However, the best you can do is save enough for your child’s education planning so that they never have to compromise on education and educational choices due to financial problems in the future.

1. Assess where you stand financially

It is not wise to invest if you cut costs from your basic needs like food, shelter, and other necessary expenses, including health and medicine.

Thus, it is important to analyse where you stand financially. Take out an estimate of your income and all the current and future assets. Once you know your financial resources, you can plan your next move accordingly without compromising your present goals.

2. Finalize a corpus amount

Once you know your current financial status, you can quickly finalise the corpus amount you want to secure for your child’s education planning based on the current inflation rate. Once you have considered all these factors, it’s time to identify your child’s financial requirements based on his current age and what he will require in the future.

3. Have a plan of action in case of parental absence

With the pace at which the world is moving today, we have no idea what comes next. Thus, experts advise that a plan of action must be ready for your child in case of absence or an untimely demise.
Many investment options can lure you towards them for planning education finance. However, plans like ULIP are highly flexible and will help you set a firm plan of action for your child’s education planning finance.

4. Opt for a child investment plan that offers the best returns and multiple benefits

Once you are clear about your current financial status, requirements, and your child’s education planning requirements, it is time to choose the right investment option for your child.
Education planning or financial planning is a little tricky. First, you must choose a suitable child insurance plan like ULIP that caters correctly to your children’s educational needs. In addition, ULIPs also offer waiver premiums in case of parents’ demise. Then, you only need to understand that your investment is in sync with the market trends and their growth.

5. Plan Your Investments Smartly

Designing an asset allocation strategy and investing in accordance with it is the wisest method to invest.

Once you have made an account of the already existing investments, which can be mapped towards your child’s education planning, you might need to save and invest on a regular basis to fill in the gap. You need to invest this hard-earned money in suitable investment avenues depending on your asset allocation pattern and risk appetite to counter inflation and increase the value of your portfolio.

Invest money in equities mutual funds if you have a longer time horizon for your investments than five years because they could generate larger returns in the long run.

Your portfolio gains are exponentially scaled up by a carefully thought-out asset allocation. In times of market instability and unpredictable economic situations, it can also serve as a shield to preserve its value.

6. Get Yourself Adequately Insured

Have you given any thought to what would happen to your desire to provide your child with the greatest education possible in the event of your untimely death or an accident that prevented you from working physically?

The death of the family’s primary provider and the absence of insurance are two of the biggest possible obstacles to a child’s education. Make sure you have enough life and health insurance to at least cover your child’s potential college and school costs.

There are ways for your family to accomplish your goals even without you. But that can only happen if you have the right amount of insurance for your family’s financial goals and regular expenses to be still met.

To know the appropriate amount of insurance coverage, you should have FN’s Human Value Calculator (HLV) calculator. Likewise, optimally insure for health. If medical problems occur, not having enough medi-claim coverage or none at all could potentially undermine your financial ambitions.

7. Prepare Yourself For The Unexpected

Always be prepared for extra expenses, such as those associated with housing, pocket money, tuition, and so forth. When your child starts high school, there may be a lot of additional costs in addition to tuition and school.

These additional costs might seem insignificant, but when added together, they’ll amount to a sizable sum. This is especially important if you want your child to pursue graduate or post-graduate studies abroad.

This is due to the fact that when your child is ultimately admitted, you will likely discover that there are a lot of additional expenditures that have not been taken into account. Everything will add up, from airfare to lodging and meals to spending money and insurance. But this is manageable.

Get an estimate of the potential expenditure. It might be wise to keep some reserve money for unforeseen costs even after estimating and making plans for all of these expenses.

8. Get Started Right Away

Last but not least, start now. Procrastination is a definite method to fail to reach your objective. Early saving and investing will provide you with a longer time horizon to achieve your goals and develop a larger corpus, which will be made possible by the power of compounding.
We all know that from primary school to college, education costs are soaring to new heights every day. However, the above-mentioned essential steps will help you efficiently plan education planning finance for your child’s future, even in your absence.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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