Education costs have risen considerably during the previous few years. Today, a four-year engineering degree from a respected college costs roughly Rs.10 lakhs. This is just the tuition for the class. Hostel fees, the cost of books and extracurricular activities, as well as incidental costs, can increase the total cost of a four-year engineering course to around Rs.20 lakhs. There’s also postgraduate education, which costs Rs.20 lakhs for a two-year degree. There will also be incidental expenditures to consider.

 To give an excellent education for your child in India, you will need to invest at least Rs.60-70 lakhs. All of this has to do with American higher education. The cost of sending your child to school in another country is roughly three times that of sending him or her to school in your own country. Remember that all of these expenditures are in today’s currency. You’ll need to account for annual expense increases if you’re planning for the future. The moral of the storey is that a good education requires a substantial financial investment, for which you must be ready. What’s more, you’ll need to plan ahead of time.

It is best to begin as early as possible

The sooner you start, the more money you’ll save, and the more money you save, the more money you’ll earn. This is referred to as the Power of Compounding in finance. The more time you have, the more compounding benefits you. Consider the following scenario: if your child is three years old and you want to save Rs.60 lakhs by the time he or she is eighteen, you’ll just need to save Rs.12,000 every month. The longer you put off starting to save, the more money you’ll need to set away each month. The difference due to compounding power can become more noticeable as time goes on.

Put at least 80% of your money in growth assets if you have the time

Don’t be afraid to take risks when it comes to long-term planning. Stock and equity funds provide the strongest long-term outperformance. If you only have a 15-year time horizon, it’s pointless to put 60% of your money into debt. Stocks and mutual funds should account for at least 85% of your total assets. Even an index fund would have returned roughly 14% annualised over 15 years. When you invest in debt, you limit your money’s potential. All long-term investing strategies should start with equity.

Look at a graded approach to enhancing your investments

While we have used the example of static investments across the 15-year time frame to make the example simpler, in reality things do not operate that way. For example, as time passes, your company will grow or you will rise through the ranks. The point is that as time passes, your earnings will increase. To ensure that a particular percentage of your income is transferred into long-term savings, you must plan out in such a way that you maintain allocating increasing sums each year. So, if you start saving for your child’s education with a fixed amount and increase it each year, you could wind up with a significantly larger fund at the end of 15 years.

Be liberal when it comes to planning your future costs

While we used the example of static investments over a 15-year period to simplify the example, this is not how things function in reality. For example, as time passes, your company will expand or you will rise through the ranks. The objective is that your earnings will increase with time. To ensure that a particular proportion of your income is transferred into long-term savings, you must work out in such a way that you maintain allocating increasing amounts each year. So, if you start saving for your child’s education with a fixed amount and increase it every year, you could wind up with a significantly larger corpus by the end of 15 years.

Look at a trade-off between risk and return on your investments

It’s not only about the money when it comes to planning for your child’s future; it’s also about the hazards. Here are a few suggestions. Equity mutual funds are a wonderful approach to plan for your child’s long-term future. Sector and thematic funds, on the other hand, should be avoided because they can add concentration risk to your portfolio. Diversified equity funds offer more stability. Second, you’ll need to adjust the equity / debt ratio as you proceed. When your child’s schooling spans 15 years, it’s OK to keep 85 percent of your assets in stocks. If you’re only two years away, though, it’s a good idea to put a significant amount of your portfolio into debt.

 Insurance should be a critical part of your child’s future planning

Finally, don’t forget to incorporate insurance into your child’s long-term goals. This should be distinct from the rest of your insurance policy. Even if you are not present, the insurance policy should be arranged in such a way that your child’s future aspirations are not harmed.

When it comes to planning for your child’s future, it’s not just about the money; it’s also about risk management. Above all, get started right away and allow time to work in your favour.