Many of us struggle with staying on track with our goals when they are too far away and understandably so. The illusion that there is always plenty of time lulls us into a misplaced sense of security. Planning and investing for long term goals can trigger similar experiences and one such goal is your child’s education. 

With education costs skyrocketing in India and across the globe, the dynamics of planning for children’s education has changed completely. Simply put, parents in this age have to put aside significantly higher chunks of money for their children’s education than what was the case until a few years ago. Consequently, planning investments for this goal can seem a tad tricky and many parents end up making mistakes that they could have easily avoided. Hence knowing the ‘don’ts’ has become imperative when laying the foundation of your child’s future. 

Starting late

It is common for parents to get complacent and delay the investment process thinking there is ample time. The perception that it is okay to start investing for your child’s future once he/she starts going to school is a prevalent and erroneous one. In the gamut of investments, time plays an extremely crucial role – the sooner you start saving and investing, the more time you will have for the power of compounding to allow it to work its magic on your money. So a delay of each year in kickstarting investments is precious time lost and you may also have to invest higher amounts in a lesser time span to build the corpus you need for your child’s education because it is something which cannot be postponed, obviously. This pressure may create a dent on your other financial goals. 

For instance, say you want to have a corpus of at least Rs. 80 lakhs ready by the time your child attains 18 years of age and if you start as soon as the child is born, you will have to invest Rs 15,000 per month assuming the expected rate of return is 12 percent. On the other hand, if you start investing when the child turns 5, your monthly investment amount will increase to approximately Rs 36,500. 

Ignoring the details 

In the past few decades, the costs of education in India have skyrocketed and the ascent has been way steeper than the growth in per capita income. According to the Report of the NSSO’s 75th Round survey of “Household Social Consumption of Education in India” conducted from July 2017 to June 2018, the education expense increased 2.75 times in 2014 as compared to 2007-08 whereas the per capita income has increased only 2.49 times during the same period. Also, the average expenditure of an Indian family on primary education increased 3.4 times while in case of upper primary education it rose up by 2.58 times. 

Many parents tend to skip the intricacies of calculating the impact of inflation and the colossal jump in education costs while estimating their target corpus. Hence it is crucial to figure out a realistic number and draft an investment plan accordingly to ensure that you do not fall short of capital for your child’s education. If you have plans to educate your child abroad then you may need a significantly larger sum than you would have needed for educating your child in India. 

Saying no to any kind of risks

Indians in general, especially the older generations have been acutely averse to any kind of investments that entail risks. Fixed income instruments, gold and real estate have been preferred asset classes and stocks and mutual funds are still viewed cynically although that is changing with younger people gravitating towards investments that carry higher risks. However, when planning for your child’s education, a rigid adherence to low-risk investments may not produce the desired returns especially when inflation and taxes are brought into the picture. While a certain degree of security in the portfolio is non-negotiable and going above and beyond your risk appetite can do more harm than good, it is important to take calculated risks for growing your wealth.

Forgetting about insurance

No matter how deftly you plan your finances for your child’s education or for other goals, the unpredictability of life can derail everything in the blink of an eye. An emergency can set you and your loved ones back financially and getting back on track after a crisis can be harder if you were not prepared for it all. 

This is where a sound life insurance policy comes into the picture and attaching insurance for your child’s future planning is equally important. In the event of any untoward incident you will be able to safeguard the safety net you would have built for your child. 

You can secure your child’s future with HDFC Life Sanchay Fixed Maturity Plan, a non-linked, non-participating, individual, savings, life insurance plan that not only provides guaranteed lump sum benefits but also adequate life cover to protect your family’s future. The maturity benefit is equal to Sum Assured on Maturity where, Sum Assured on Maturity is equal to (Annualized Premium or Single Premium) x Guaranteed Maturity Multiple (GMM). The GMM varies by age and premium payment term. The assured returns on maturity means this plan can be your go-to resource for not just your child’s education but for a wide variety of life goals at various stages such as marriage or retirement because there is no risk of capital erosion due to market factors.  

You can choose coverage on Single Life or Joint Life basis and there is a wide range of policy terms of upto 40 years. You will also be afforded the flexibility of picking from a variety of premium frequency options such as single, annual, half – yearly, quarterly, and monthly. The accidental disability and the critical illness riders will safeguard your finances during health emergencies too. 

While there is no way anyone can be completely prepared for the twists and turns that life may throw at us, buying the right insurance policy when planning your child’s education will ensure that all your efforts towards creating a financial fortress to secure your child’s future do not get washed away when the tide turns.