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Financial Planning
Create an education fund that graduates debt-free kids
With rising education costs, can asset allocation help you future proof your child’s dreams? Find how your investment can build an education fund for your kids.
- Education costs in India are rising steeply, demanding early financial planning.
- Some of the popular vehicles include mutual funds and ULIPs to build for your child’s education fund.
- Tax benefits under Section 80C apply to ULIPs and certain mutual funds.
- Start early, stay consistent, and tailor investments to your risk appetite and time horizon.
Have you ever paused mid‑smile at your child’s school gate, wondering how you will fund their dreams when college fees soar beyond reach? Education costs in India are piling up faster than most household budgets can stretch. Yet there is hope. With a versatile asset allocation strategy that includes assets such as equities, mutual funds, ETFs, ULIPs, and fixed deposits, you can build yourself a growing education fund that weathers market swings and keeps your child’s future secure.
Where can you invest?
There is an array of investment opportunities in India today. Some of the most popular and helpful ones include:
Mutual funds
A mutual fund pools your money with other investors to buy a diversified basket of shares chosen by professionals who have years of expertise in the industry. As your mutual fund investment is spread across dozens, if not hundreds, of top companies, a poor result in one stock can be offset by gains in the others. This built‑in diversification makes mutual funds best suited if you have around 8-10 years, when you need both growth and some amount of risk control. Such funds have generated roughly 8-12% annualised returns over ten-year periods.
ETFs
ETFs or Exchange‑Traded Funds mimic a whole index, such as NIFTY50 or SENSEX. They trade every day, much like the highly liquid equity shares. They have considerably low expense ratios, compared to active mutual funds, to keep your fixed costs low. You gain instant diversification, which is helpful when you want a hands‑off, low‑fee way to grow your child’s education kitty, while also keeping focus on their personal growth.
Children ULIP
Children ULIP is a special type of unit‑linked insurance plan that brings together investment growth with life cover. They also come with tax deductions under Section 80C and historically deliver annual returns of approximately 10–12%. You can switch between equity and debt funds as your child nears college age for added safety as well. ULIPs suit parents seeking both protection and growth, though higher charges mean you should compare their fund management fees carefully.
Sukanya Samriddhi Yojana
If you have a daughter below the age of 10, the Sukanya Samriddhi Account is a smart investment option to consider. This government-backed savings scheme helps you build a secure financial future for your child by locking in funds until she turns 18. You can contribute up to ₹1.5 lakh annually, and the amount invested qualifies for a tax deduction under Section 80C of the Income Tax Act.
How to invest?
Choose a clear process before you commit any capital.
- First, define your goal and estimate the total cost of your child’s higher education in today’s terms and inflate it by at least 4% per year to find your target corpus.
- Second, determine your time horizon and risk tolerance: longer periods provide more equity exposure, shorter ones demand safer debt instruments.
- Third, select products; Combine equities or ETFs for growth, SIPs for discipline, ULIPs for protection, and Sukanya Samriddhi Yojana (in case of girl child) or fixed deposits for capital preservation.
- Fourth, set up automated investments—start SIPs to enforce consistency.
- Finally, review your investment portfolio every six months and rebalance to maintain your desired asset allocation.
Conclusion
You secure your child’s education by blending growth and safety in your investments. Allocate funds across equities, SIPs, ETFs, ULIPs, and fixed deposits based on your time horizon and risk comfort. Start contributions today—small monthly SIPs and strategic asset allocation compound into a substantial education corpus over 8–15 years. Monitor costs, tax impacts, and liquidity needs to adjust your mix as goals near. Act now to lock in lower entry points and harness market growth. Your decisive steps today guarantee that rising fees never derail your child’s academic journey.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.
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