Raising a teen can be a bittersweet experience – it is at this stage in the parenting journey that you may have to deal with a tornado of emotions, with your child behaving in ways that can seem obscure and even shocking. But those feelings of apprehension, and sometimes even desperation, will always be pervaded by moments when the realization dawns on you that in a few years they will be adults and be busy on their respective paths that they would have chosen for their lives.
They can also be worried about how they can survive in the big bad world outside the protective cocoon of your home and you want only the best for them. One way to do this would be to financially prepare for your teen’s college education, if you have not already started.
In the past 10 years, school fees and other related expenses have increased 150 percent. Over the same period, average annual private school spending has increased 175 percent, while the cost of vocational and technical education has increased 96 percent. The irony, however, is that only 20 percent of parents surveyed had specific investments committed to raising children.
Parents see fees as a savings goal, but forget about the following: – tuition fee inflation; Travel; Accommodation; current expenses and exchange rate fluctuations (in the case of foreign education). Unfortunately, they then have to regret or sacrifice many things that are intended to achieve their personal goals in life and end up working overtime. Their unpreparedness not only leads to unfulfilled dreams, but shifts the burden on the children in the form of educational loans.
So what can be done?
Sujata Sinha (name changed), a banker and mother of two children aged 15 and 20, says: “Ideally, all parents should start saving for their children’s college education from the day they are born, but most of the time it is a blow life torn your best plans to pieces and you are unable to work towards your financial goals. Something similar happened in our case, and we couldn’t start building our own corpus to finance our children’s college expenses until my older son was 14. “
According to Sinha, it may be a Herculean task to build a solid reservoir of money in less time compared to what you would have amassed earlier, but it’s not impossible. “Yes, it’s harder, but it’s also doable, and the biggest lesson we learned on our trip was that having honest discussions with your children about their college expenses will help ease the financial burden on the whole family. My husband and I discussed our financial plans with them and assured them that we would leave no stone unturned to finance their education. But we also explained how strict we have to be with money in order to be able to save enough for your studies. It made them realize that money was a finite resource, and it also fueled their urge to be better students. “
The cost of higher education in India is skyrocketing. Add inflation and you have a tricky situation. According to a 2019 report by the CARE rating agency, spending on general education, which includes undergraduate and postgraduate courses, has quadrupled over the past decade ₹8,331 per student per year and the cost of professional courses rose nearly 52%.
Your budget would depend on what class your child would like to take after high school. Once your child has taken the board exam in grade 10, it may be a good idea to talk to them about the courses they’re interested in and the colleges they’re looking to apply for. For an engineering or medical degree at a private college or university, for example, a significantly larger corpus would be required. A humanities or business degree, on the other hand, can cost less. You can find out about the tuition and dormitory fees that have been charged by some universities over the last few years to get an idea of the capital you need.
Choosing the right investment path
It’s pretty obvious that if you want to build a corpus for your teen’s college education, then you need a bulletproof budget. The next important step would be choosing your investment options, keeping in mind that you may not have more than 5-6 years to reach your goal. Traditional investment vehicles may not produce inflation-proof returns, and if you run out of money when your child goes to college, you may have to resort to other funds that you may have invested for different purposes, or you may need to resort to other funds for an education loan take up.
Mutual fund investing in a mix of equity and debt through SIPs can be a better way to accelerate your capital growth. Given the timeframe, it would be wise to invest in large-cap and diversified-cap funds as these are less risky than mid-cap and small-cap equity funds, while investing in high quality debt funds can offset the risks of the equity component. Because mutual funds offer investors the flexibility to invest with only ₹500 does not require you to wait for capital to accumulate to invest as you do with fixed income instruments. Additionally, SIPs help you take advantage of the average rupee cost by entering the market at different times without actually scheduling your investments, which can be a risky business. As you get closer to your goal timeframe, you can gradually begin to focus more on leverage funds and reduce your equity weighting so you don’t run the risk of losing part of your corpus in the event the markets get into precarious terrain Once.
Sinha believes that investing in higher education can also serve as a stepping stone for children to gain proficiency in money management. “My older son is studying at one of the best engineering schools in the country. In retrospect, I feel that the decision to let our children know about the financial strategy for their education helped them develop a mature perspective in dealing with finances. This is a milestone that affects the children themselves and parents can take this opportunity to familiarize them with developing and implementing a financial plan to achieve your goals. “
The central theses
• If you feel overwhelmed at the thought of having less time to save for your child’s higher education, speak to a financial advisor who can create a plan that best suits your skills.
• The right planning at the right time is the only solution to this. A planned investment made over a long period of time has the potential to produce the results you want when your child is ready for higher education.
• Mutual funds aim to provide a convenient way to plan and invest in market-linked financial products that can outperform inflation over the long term.
• Get good credit by paying your EMIs and credit card bills on time. In case you are unable to raise enough capital when your child is ready to go to college, you can easily get a loan to fund their child’s education.
This article is part of the HT Friday Finance series published in partnership with the Aditya Birla Sun Life Mutual Fund.
source https://collegeeducationnewsllc.com/worrying-about-college-education-of-your-teenage-child-here-is-how-you-can-prep/
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