Mutual Funds for Children Education

5 Less Known Ways to Use Mutual Funds for Children’s Education Planning

The moment your first child is born, your mind should start working on how you can plan for their future. Your child’s upbringing and the education they receive will have a huge role to play in the shaping of their character and attitude. As a parent, you too want the best of everything for your child. Setting up a child education plan should be number one on your list of things to do when you become a parent.

One of the best ways to start saving funds for your child’s future is by investing in mutual funds. Mutual funds allow you to invest and grow your funds over a period of time so that when your child needs expenses down the line, you already have a sizable corpus ready.

So let us look at 5 ways to use mutual funds for your children’s education planning

Chart Out Goals For Your Child

The first thing that you must do is chart out a roadmap of goals for your child. Start with their primary and secondary education, then their higher education or college degree, followed by marriage. Once you have an idea as to what your child will be needing in the next 20 years, you can plan your mutual fund investment better. This will also help you in choosing which mutual funds to invest in based on your short-term and long-term needs.

Assess Financial Requirements

Once you have a plan in place, you need to assess how much funds you’re going to need in the future for your child. For example, you may need around Rs. 2 lakh for your child’s school admission initially, while for higher education you may require upwards of Rs. 20 lakhs based on the vocation they choose. Factoring in the inflation rate will give you an approximate amount of funds you need in the future. Once you know this figure, you can start choosing your funds and start investing in mutual funds

Choose the Right Mutual Funds

Mutual funds are of various types. Equity funds invest in the stock market, have higher volatility but give excellent returns when the market condition is good. On the other hand, debt funds are stable but have lower returns. You must choose how much to invest in which funds are based on your requirements. For example, for short-term requirements, invest in debt funds so that your funds are not at risk and you can withdraw them in a couple of years.

For long-term goals like higher education, you can invest in equity funds since investing in these for longer durations will minimize risks while at the same time give excellent returns.

Start Investing Via A Systematic Investment Plan (SIP)

Investing for a long term goal means that you have to invest with discipline. If you directly invest in mutual funds by lump sum investments, chances are you won’t be very disciplined and your investment may be haphazard. The much better option is to invest via SIPs. This not only gives you an opportunity to invest in a disciplined manner but also lets you invest small amounts over a long period of time. 

Increase Your Investments Periodically

As you keep investing your own income will also increase over a period of years. When that happens, make sure you also increase your investments and SIP amounts. This would help you reach your goals for your child faster and you’ll end up with more funds when the time comes.

Final Word

Mutual funds investment is a great avenue if you want to plan your child’s education. Education is costly, and you do not want to run from pillar to post when the time comes for your child’s education. It is an important aspect of your child’s life and one must start planning for it as early as possible.