Free college education for your child

For most parents, there are two major areas of a child’s life that play a decisive role education and marriage. Parents try hard to ensure that they can provide the best education for their children within their means as well as save sufficiently to spend as lavishly as possible during the child’s marriage.However, in several cases, one is late in realising that the child wants to go abroad to study and that the family does not have sufficient funds to support the child’s dream. While there are several financial institutions that provide education loans, the burden of repaying such credit generally falls on the child once he starts his professional career.

Moreover, the requirement for finances may be higher when your child wants to pursue a post graduate degree or specialised course.In addition, financial institutions have a broad list of ‘approved’ institutes your child can attend. Availing an education loan is easier for these institutions. There are cases when a course in some institutes cannot be funded by a loan. Hence, it is better to be prepared in advance for such eventualities.Considering the fact that the rupee has started depreciating against the dollar, a degree from a foreign university has become dearer. It is important that parents try to plan a debt-free college education for the child.

Here are a few things to consider.If you have kids and have not started planning for their future, then start now. There is no substitute for starting early when it comes to planning for a financial goal. The longer the term, the easier it is for you to take advantage of compounding. Just to give you an example: If one starts investing today with Rs 10,000 per month for 10 years, then the returns will be higher than someone who starts investing Rs 20,000 per month for five years, even though the capital invested in both cases is Rs 12 lakh.Understand your child’s ambitions: While growing up, children are often confused about what they would like to do in their professional careers. Parents at this stage need to do two things First, constantly keep communicating with the child about his/her career aspirations and interests, among other things. Second, identify possible career choices that you would like your child to pursue. For example, if you want your child to study for an MBA degree,Master of Architecture, start investing in a fund for it.Short-list possible universities: Once you are aware about the subjects/courses that your child might like to pursue, you can start identifying the various universities where your child can study, along with their fees. If you are contemplating on sending your child to another city or country also factor in the cost of accommodation, among other things.

Inflationary hits: Don’t forget to account for inflation based on your time horizon. A financial planner can help you here to determine the average increase in education costs (in correlation to inflation) and the likely cost of the same after 5-10 years.Define your investment strategy: The one thing you don’t want to do is take a risk with the investment being created to fund your child’s future. However, the trick here is adopting a balanced approach where you take exposure to both equity and debt instruments. You could also consider investments in other asset classes.
The macro picture: While planning for your child’s education is important and vital, you should not lose sight of other financial goals. You need to ensure that the investment plan for your child’s education can be plugged into your overall financial plan.Education plays a major role in defining a child’s future. By beginning a financial plan for your child, you will gift him the freedom of enjoying a debt-free education.