Wednesday, 12 June 2013

How to Save for the higher education of your children?

Parents are worrying about the higher education cost of their children even before they born. Wise parents start any good investment scheme for their child's education when they born. Now education is costly even if our government declared right to education act. Around Rs. 50 Lakh to be spent to bring up a child to a qualified professional and it is varying as per the professional degree you choose. How can a regular income parent can set part this much money apart from all other household expenses which is increasing day by day. This article explains how to Save for the higher education of your children. You can choose any of the following options as per your need and risk appetite.

Public Provident Fund. One can start a public provident fund account for the higher education of your children. This is one of the best options which has no any risk factor involved in it. The interest earned from Public Provident Save for the higher education of your childrenFund is not taxable as per the current tax rules. The amount you invested also exempted from income tax under section 80C of income tax act. If you start a PPF account for your children when they born, you can accumulate a good amount when they reach at higher education level. Read more about the Public Provident Fund.

Bank Deposit. This is another option for those parents who are not ready to bear market risk. Start a Recurring deposit account with any bank and shift the maturity value to a fixed deposit account year after year and allow the fixed deposit renew itself when it is matured every time. The interest earned for recurring deposit and Fixed deposits are taxable unless the Fixed deposit is a tax saving FD. The main drawback of this investment is that the earnings may be less than other investment schemes such as Mutual Fund and Equity Saving Schemes. But this is one of the safest ways of investing for your children's higher education.

Mutual Fund. Investing regularly in mutual funds are  also a good method of investing for your children. Start Systematic Investment Plan and invest regularly in some good mutual fund schemes. But you must be more careful than PPF and Fixed Deposits, because it will affect the market risk. Diversify your investment in various Mutual funds such as equity funds, debt funds etc. If you are not much experienced in mutual funds, get help from a  good financial adviser. But in my opinion you must keep only a portion of your investment in Mutual Funds and try to invest in other financial instruments also.

Stocks & Shares. This is also another investment option for the higher education of your children. Choose some good companies and buy their shares and hold it for a long time. But when you choose companies and shares give much care and make regular checking. If you are not experienced get advice from a good investment adviser.

Gold & Silver. Investment in precious metals is also a good option. The price of gold is always shown an increasing tendency. Now you can purchase Gold Mutual Funds or Gold Exchange Traded Funds to avoid risk involve in keeping and handling physical gold.

Investment in Real Estate. Purchasing a house property or Land for the higher education of your children is also a good option. The Value of real estate is always increasing and you can dispose them when you need money. House property can earn some regular income in the form of rent also and you can invest those amounts in any of the above mentioned investment schemes.

Insurance Schemes for higher education. Most of the insurance companies have their own insurance schemes and Unit Linked Insurance Plans for satisfying the financial needs of your children’s higher education. Choose a good plan and start depositing premiums when your child is very young. Learn all aspects of the policy before joining with them.

In my opinion do not stick around in any single investment plans, but chose a few convenient schemes from the above list and diversify your investment to avoid risk and for the better future of your children.

How to save for the higher education of your children?





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