Child plans

Why Your Child Education Plan Must Begin Before Your Child Turns One

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Why Your Child Education Plan Must Begin Before Your Child Turns One

You visit your friend’s home for his son’s birthday party. This is the first social outing with your newborn child. You discretely inquire about the total tab of the party. His answer floors you and you start thinking about saving you need to do for your son’s first birthday. Believe it or not, but even as you do that, you will need to start saving for your child’s college 18 years hence. If you think we are going over the top, do read on

Rising higher education costs Across the world, the rise in costs of higher education happens faster than general price rise. India is no different. A two-year management course at the prestigious Indian Institute of Management, Ahmedabad during 2005-07 was Rs 3.16 lakh. In ten years, that went up six fold to Rs 18.5 lakh.

What makes children’s higher education a formidable goal is that the amounts involved are large. You need time to save such amounts. Getting an idea of the savings target helps you immensely. Let’s assume that the cost of a course is Rs 18 lakh and you will need the money in 18 years. If education costs grows modestly at 6 per cent every year, you are looking at a target of Rs 51.37 lakh.

This still leaves you with the job of finding out how much you need to save regularly. So, if you start in the child’s first year, you need to invest Rs 11, 432 every month assuming that your money grows by 8 per cent. Suppose, you delay this by a year, this monthly investment amount goes up to Rs 12,685 and to about Rs 15,769 if you begin when your child is three.

So, there you are. While the need for money for your child’s higher education may seem distant when you become a parent, the truth is that every day counts when it comes to making your money grow.

With time at hand, you can save large amounts with manageably small amounts of investments.

An early start ensures that you don’t need to do anything special even as you enjoy both the small and big moments of your child be it your child’s first birthday party or saving for your child’s college.

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