Every parent has lofty dreams and aspirations for their children. With the soaring cost of education in the country, it is important for every parent to have a financial plan in place for their children’s higher education.
Weddings in India are extravagant affairs and can create a huge dent in the finances of any family. Wedding expenses can run into several lakhs of rupees and it is imperative that you plan for such major life events.
Whatever be the dream that the parents have for their children, they need to start planning for it well in advance. The alarming inflationary trends in the country need to be taken into account while chalking out a financial plan for your children’s future.
The cost of education in India has been touching new highs in the past decade. For example, the annual fee in IIT was Rs.50,000 per year in 2008. It had gone up to Rs.90,000 in 2013. Today, it stands at Rs.2,00,000 per year. A management degree from IIM Ahmedabad will leave you poorer by Rs.19.5 lakhs.
An education abroad will cost much more, not to forget the living expenses in most developed countries. Considering the exorbitant cost of higher education in the country, it is important to start planning early for your children’s education. Ideally, financial planning for your child should start as soon as he/she is born.
A period of 15-20 years would be ideal for planning for your child’s higher education. Fixed deposits are a good option for long term financial planning for your child. You could choose an FD with a term of 3-5 years and keep renewing it. A cumulative FD is ideal for the child since the interest amount gets reinvested and gives you the benefit of compounding.
Minimise your risk exposure
Though equity-related investments can give you better returns, it would be ideal to choose safe and secure investment vehicles for your child. Fixed deposits come with a guarantee that the capital amount will not get eroded. The interest amount on fixed deposits is also guaranteed. The FD calculator enables you to have a clear idea about the maturity amount and gives you greater control over your investment.
The fixed deposits offered by certain NBFCs offer much higher returns compared to bank FDs. Bajaj Finance offers some of the best interest rates in the market on Fixed Deposit for children. Being a company with a credit rating of MAAA from CRISIL and FAAA from ICRA, you can rest assured that your money is safe. The Bajaj Finance FD calculator will help you choose a scheme that suits your personal requirements. The company offers you the convenience of starting your FDs online.
Avail loans against FDs if required
Fixed deposits come with the added benefit that you can use it as collateral to avail loans against FDs. In case you need money for your child’s education before the maturity date of the FD, you can avail a loan from the financial institution. The rate of interest will be 2-2.5% higher than the FD interest, but the advantage is that the FD remains intact and keeps generating interest for you. You can repay the loan in Equated Monthly Instalments.
Higher education in India is becoming an expensive proposition and parents need to have a meticulous financial plan to help their children fulfil their educational aspirations. You need to choose secure investment avenues and stay invested for longer periods of time to generate the required amount of funds.
Investing to make sure you have enough money for your future children is very important and very sensible. Investor shield have lot of different investment opportunities for you to go through.
Aisha Aggarwal is a financial advisor by profession & has rich experience in the field of financial planning. She has written a lot about many different investment options like FD (Fixed Deposit); Mutual Funds etc.