How to build an education corpus for your child in about 7 years?

As a parent, you dream of giving your child the best education. To fulfil this desire, you need to take the right investment decisions at the right time. If you want your child to study in an IVY League college or get an MBA degree from the country’s best institutes without any financial constraints, you need to invest your savings smartly. Take a methodical approach to achieve this and begin a step-by-step saving process at the earliest.

In case you are approaching your retirement, start looking for the various investment options for senior citizens to fund your child’s education. Among the bucket of investment options available in the market, an FD for senior citizens and PPF are known to be two of the safest options. However, in case you are starting to plan your child’s future years ahead of your retirement, you can consider options that are more aggressive and offer higher gains.

These include equity and SIPs. If you have a window of about 7 years until you need to finance your child’s higher education, the best way to invest in by creating a mixed portfolio including short-term investment options and long-term options. This will ensure you have sufficient funds to finance your child’s immediate and future goals.

Take a look at the best investment options that will help you fund your child’s educational goals in this timeline.

  • Invest in fixed deposits

Investing in a fixed deposit is better than putting your money aside in a savings account. Unlike a meagre interest offered by a savings account, you can gain from higher interest and assured returns from a fixed deposit. Choosing an NBFC such as Bajaj Finance will ensure that you gain from 8.40% to 8.75% interest on your investment. This FD interest rate also qualifies as one of the highest offerings in India. Apart from that, the security offered by a Bajaj Finance Fixed Deposit is very high, as it has been awarded ICRA’s MAAA (Stable) Rating and CRISIL’s FAAA/Stable Rating. 

In case of cumulative FDs, you can access your investment and interest earned only at maturity. On the other hand, based on the compounding frequency you choose, you can access the interest payout on your FD at regular intervals in case of non-cumulative FDs. The longer the tenor and shorter the frequency, the higher will be your earnings. You can use the FD calculator to calculate your returns in advance basis the interest rate and tenor and accordingly decide the exact amount for investment.

  • Invest in Systematic Investment Plan (SIPs)

Over the years, SIP has become very popular among investors. This is owing to the fact that a SIP lets you indirectly park your funds into the equity market. This means that the risk of losing funds in the equity lowers as your fund managers are experienced enough to tackle the market for better earnings. Based on your monthly budget, you can start putting aside a minimum of Rs.1,000 a month in SIPs. Investing in SIPs will help you attain a financial discipline that will help you build a bigger investment corpus with time. Various type of SIPs are available in the market today, such as ‘perpetual SIP’ or ‘active SIP’ and you can select one based on your financial standing and long-term requirements. Also, once you cross the one year mark, you can easily liquidate your SIPs to fund immediate needs.

  • Invest in stocks

If you have a high risk appetite, you can easily invest in the equity market to increase the gains on your investment. Here, you can directly earn from movements of the market and the bullish trends of retail and high-value scrips. Even though you can invest in the stock market on your own, taking expert help will help you invest in a more focused way. So, if you have some immediate needs concerning your child, stock market investments will give you quicker returns within a shorter span of time.

While planning your investment folio, you must keep in mind certain factors such as your monthly income-expenditure ratio, maturity dates based on the time you need the money in hand, and your child’s goals.

All these factors will help you decide how much and where you can invest to yield the maximum amount on maturity. Don’t forget to take inflation and taxation on earnings into consideration. Plan your investment at the earliest and invest towards your child’s education wisely.