One should have a clear strategy while planning your child’s future education, & starting early is the key to smart savings. Whether it is a traditional plan, mutual funds, fixed deposits, or educational plans, smart savings is a must. Children’s educational plans are investment tools that are developed for parents to save & invest funds for their children’s future education. These plans offer a dual benefit of savings & protection that offers guaranteed returns. This includes book costs, tuition fees, & other educational expenses. In this article, we will discuss some of the best ways to save money for a child’s education, saving parents from financial constraints.
Best Ways to Save Money for a Child’s Education
Let us now discuss the best ways to save your funds in the best child education plan:
- Create a Monthly Budget
Parents should plan their monthly budget, which will help in creating a secure future for the child. This can be done in the mentioned ways:
- Jot down all your incomes & expenses over a period of a month.
- Establish the areas where the expenses can be cut down.
- Determine additional income sources, which may be through a side business or part-time jobs.
- Start Investing as Early as Possible
It is always advised to start saving for your children’s education as early as possible, which can also include government-funded educational schemes. This can be done in the mentioned ways:
- The earlier the savings are started, the more time it gets to grow.
- A dedicated savings account should be opened for your child’s educational purposes.
- Invest in Education-Specific Funds
Parents are advised to invest education-specific funds for their children’s education, for which they can also consult a financial advisor. This can be done in the mentioned ways:
- By investing in mutual funds that further invest in educational institutions.
- By investing in firms that render educational services.
- By investing in stocks of education-based companies.
- Take Advantage of Tax Benefits
Parents can avail themselves of tax exemptions on expenses incurred in the education of their children. This can be done in the mentioned ways:
- Parents can avail of tax exemptions on expenses incurred on the education of their children u/s 80C.
- Look for tax-free bonds to invest money to fund future educational costs.
- In the U.S., eligible families should also explore the 2025 child tax credit, which may offer additional financial relief and help free up funds that can be allocated toward education savings.
- Buying Insurance Plans
Child Insurance plans come with a dual benefit of savings & protection. This assures that their education will not be interrupted in case of any unforeseen event such as an accident. This can be done in the mentioned ways:
- Choose those plans with a dual benefit of savings & protection.
- Look for those plans that offer tax exemptions u/s 80C on the premium paid.
- Look for those plans that offer tax-free maturity proceeds u/s 10(10D).
- Investing in PPF
A Public Provident Fund is a type of long-term investment plan backed by the government of India, offering attractive interest rates along with returns. The amount to be deposited in the fund ranges from INR 500 to INR 1,50,000 each financial year, either in EMIs or lump sum. The amount deposited, maturity amount & interest amount are totally exempt from taxes. This can be done in the mentioned ways:
- Avail a deduction of tax u/s 80Con the amount invested in PPF.
- Avail exemption of tax on the amount of interest received u/s 10(11).
- Before the period of 15 years expires, it is better to plan for the future expenses of your children.
- Exchange Traded Funds (ETF)
These funds can be easily traded in the stock exchange, which are considered to be nominal & efficient modes of buying & selling stocks or bonds. ETF’s are best suited to achieve long-term goals such as children’s education, where the expense ratios are lower, & hence higher liquidity. This can be done in the mentioned ways:
- Try investing in Exchange Traded Funds to diversify your portfolio & achieve low expense ratios.
- Trading in ETFs offer flexibility.
- It offers the creationof long-term investment strategies.
- Buying Real Estate
They are considered to be consistent & valued types of investments when it comes to funding your child’s education. Also, the amount of rent receivable from a property is generally on the higher side than the growth of the property itself.
It also offers tax deductions u/s 24(b) on the amount of interest received on home loan & on the amount of principal amount reimbursement u/s 80C. This can be done in the mentioned ways:
- Consider real estate investments to reap rental income that can be used to fund children’s education.
- Get benefits from income from capital appreciation on the property in the long run.
- Get deduction of taxes on the amount of interest received u/s 24(b) & principal repaid u/s 80C.
- Take Advice From an Expert Financial Planner
Financial advisors can assist in choosing the best investment plan for a child. They also help you decide the best investment tools, tax-saving plans, &the best means to save for your child’s brighter future. This can be done in the mentioned ways:
- Helps get tailor-made suggestions when deciding on investment tools & plans.
- Helps in knowing the best tax-saving plans for children’s education.
- Helps in designing a customised& extensive investment plan that best suits your requirements.
Conclusion
Child educational plans are the smartest way parents can save for their children’s brighter future. In this uncertain world, it is advised to start saving early & receive funds at each & every milestone of life, such as school, college, or any specialised course, whatever the challenges may be. With an effective & smart mindset, it becomes possible to provide the best education to your children that they deserve.
