Goal-Based Investing for Your Child’s Education

Education is one of the few big goals with a firm deadline. That makes it easier to plan, but also less forgiving of a late start.

How do I plan for my child’s education?

1. Pick a realistic course and country. Check current fees and living costs, since an MBA in India and a master’s abroad are very different goals.
2. Add inflation. Education costs often rise faster than general prices. 8% to 10% is a common planning range.
3. Find your monthly figure. Use the Child Education Planner.
4. Lower risk as the date approaches. Begin moving to safer funds about three to five years before fees are due.

How does the child’s age change things?

What is the common mistake?

Many parents use child-labelled insurance plans that combine cover and investment. These can carry high costs and modest cover. It is usually better to keep term insurance and investing separate. Your term cover protects the goal if something happens to you.

What about education loans?

A loan is a reasonable part of the plan. Interest on eligible education loans may also qualify for a deduction under the old regime. Avoid dipping into retirement savings, because there is no loan for retirement.

Also consider a step-up SIP, since your income will probably rise over the years. Starting with a smaller amount and raising it each year can be more realistic for young parents.