While it’s getting increasingly harder to get a good job even after a good education, the price of education, especially higher education, is rising unabated in the country. But it is not just the cost of higher education that has increased, even providing decent primary and secondary school education to a child costs a bomb.
According to a survey, 65% of parents spend 50% of their yearly income on a child’s school education and extracurricular activities. By the time their child becomes a teenager and graduates from school, the majority of parents have already spent Rs. 18-20 lakh on education. Therefore, it’s equally important to factor the current education costs when you start investment plans for a child.
The statistics are very alarming when it comes to higher education in India. Below is a sample.
The State of Higher Education in India
|44.81 million Indian undergraduates aged between 18-24 years are too poor to pursue higher education – National Sample Survey Office (2014)||65% students are enrolled in private institutions in various courses.||Around 53% of college students are forced to enrol in private institutions due to lack of good govt.-run colleges.||Out of pocket expenditure on education was Rs. 2,461 in 2007-08. It increased to Rs. 6,788 per student in 2014. A 175.8% increase in just 6-7 years.|
Making a timely investment in a ULIP Child Plan can effectively help in funding your child’s higher education aspirations. Bajaj Allianz ULIPs available on Finserv MARKETS allows you to save for your child’s future by investing in top-rated ULIP funds with returns as high as up to 25% over a 5-year period.
If you are worried about the rising costs of higher education for your children, don’t worry! Instead, use these 5 effective investment strategies to shape their dreams.
Five ways to build a robust Child Plan
Start as early as possible
You need a substantial amount of time to create a sizable corpus that takes care of all the higher education expenses. You must start making investment plans for your child as soon as he/she is born or not later by 2 years.
Your child will be in college by the time he is 18 years old, and if you start by the age of 2, you can build a considerable child education fund by that age using the magic of compounding.
You must factor the growing cost of inflation when you invest in a Child Plan. Your investment goal shouldn’t be based on current costs of higher education but of the future – probably 10-15 years from now based on your child’s current age.
If your child wants to study in a good medical college in India after 10 years, it will cost you around Rs. 55 lakh to complete a 5-year MBBS degree. An engineering degree will cost you around Rs. 15-20 lakh and an MBA degree around 27 lakh.
Don’t sacrifice returns for the sake of security
You must be a bit aggressive in your investment outlook to accumulate a sizable fund for your child’s education by the time when it’s needed. Therefore, a ULIP Child Plan makes sense compared to a PPF, traditional insurance plan or FD or any debt fund. With ULIPs you can switch funds according to market movements and maintain a balance between equity and debt funds to optimize your investments.
Bajaj Allianz ULIPs available on Finserv MARKETS offer free unlimited switching of funds and has one of the lowest cost structures. You can enjoy various ULIP benefits, such as zero allocation charges and return of mortality charges. Additionally, you can benefit from loyalty additions and returns enhancers to further increase your child’s education fund.
Diversify when required
Learn to diversify when your investment is not yielding results or if you are putting too much at risk. While your goal is to build a significant corpus, you should be aware of your risk appetite before investing. In a volatile market, limit your exposure to equities and spread your risk by investing in debt instruments.
Get life protection
Buying a term life insurance is the most valuable thing that you can do for your child’s future. In the unfortunate event of your death, the death benefit will ensure that your family has enough to carry on and as well as pay for your child’s further education.
Therefore, starting early, calculating the corpus that you need, deciding the investment horizon, and diversification are some of the things that will help you effectively fund your child’s education and give him a secure future.
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