A Child education planner is an online tool that can be used by parents to estimate the amount of funds required today to achieve the financial objectives tomorrow. This means a planner helps assess the amount required to be invested monthly, taking into consideration factors such as inflation, education costs, length of investment, etc. These plans offer a dual benefit of savings & protection, with guaranteed returns. This includes book costs, tuition fees, & other educational expenses. In this article, we will explore some of the best ways to save money for a child’s education, thereby alleviating financial constraints for parents.
How Does a Child Educational Planner Work?
It calculates the expenditures associated with the actual financial objectives & hence tracks progress thereof. This calculator uses the concept of future value to ascertain the funds required for a child’s future.
FV = PV (1+R) ^ N
Where,
FV =Future Value
PV = Present Value
R = Rate of return on the investment
N = Duration of the investment.
Let us suppose your child is 3 years old at present & you will require funds when your child is 18 years old, i.e. 15 years from now. Now, let us presume that the present cost of education is INR 8 lakhs & considering the inflation factor to be 6%, the future value will be:
FV = PV (1+R) ^ N
= 800000 (1+ 0.06) ^ 15
= INR 19,17,246.6
This means you will need INR 19,17,246.6 in future to meet the future needs of your child. Now, let us presume there are no savings as of today, & the rate of return is 7% per annum, the amount required per month from today would be:
Using FV = PV (1+R ) ^ N ,
19,17,246.6 = PV (1 + .0.7) ^ 180
PV = INR 6,049
It considers the following factors at the time of creating an education plan for your child:
- The period remaining towards the objective, i.e. the gap between the present age of the child & the time funds will be required.
- The present cost of a course of higher education.
- Present savings
- Interest rate on present savings
- Anticipated inflation rate for the cost of schooling
Factors Affecting a Child’s Educational Plan
Provided are the factors that affect a Child Plan:
- Estimating the Future Cost of Education
Initially, estimate the future educational costs, which will not only include tuition fees, but also study material, accommodation, & extracurricular activities.
- Choosing the Right Child Educational Plan
These plans offer dual benefits of insurance & investment, offering parents both security & wealth creation. Parents should compare the different plans available depending on the premium payment flexibility, sum assured, maturity benefits, etc.
- Exploring Child Investment Plans for Maximum Growth
Parents should consider different long-term investment options available in the market, which include fixed deposits, mutual funds, PPFs, ULIPs, etc.
- Considering Inflation & Rising Costs
The inflation factor affects education more in comparison to general costs. If parents consider a well-designed plan, it automatically considers the inflation factor, which ensures the investments made are in sync with the rising educational costs.
- Choosing an Appropriate Child Plan for Financial Security
These plans, besides meeting educational requirements, also help meet financial needs in case of an emergency situation.
- Starting Early for a Better Financial Growth
Parents can accumulate a health corpus fund by starting early, as it increases the scope of power of compounding.
- Flexibility & Withdrawal Options
These plans offer flexibility in withdrawal of funds, while well aligning it with the educational milestones of your child.
Reasons to Choose a Child Education Calculator
Provided are the reasons to choose a Child Education Planner:
- Accurate Cost Projections:
A child education calculator considers all the relevant data required to make an estimate of the future education costs. It covers all the levels, which include school, colleges, universities, & everything.
- Tailored to Your Needs:
This calculator is quite flexible as it allows customising the details to be entered depending on the age of the child, the desired level of education, & taking into consideration the expected rate of inflation.
- Smart Financial Planning:
It helps you perform financial planning by determining the amount required to be invested every month, ensuring all the dreams of the child will be fulfilled.
- Stay Ahead of Inflation:
It takes into consideration the inflation costs as well, helping to make an appropriate estimate of rising educational costs.
- Effortless & User-Friendly:
It provides an easy-to-use platform for the parents to explore & get quicker results with no complexities involved.
How to Use a Child Plan Calculator?
Provided are the steps one should use a Child Education Planner:
Step 1: Click the tab “Calculators”, & then choose “Child Plan Calculator”.
Step 2: Provide your child’s name & the amount that is to be saved to achieve the educational goals of your children.
Step 3: The calculator will show the estimated amount that should be invested, depending on the amount that is required at the completion of the policy tenure.
Step 4: Then you are required to provide the time required for the accumulation of the fund.
Step 5: The duration for which the amount remains invested, i.e. investment horizon, is quite important. This is because the longer the investment is made, the more money grows.
Step 6: The child plan education calculator takes into account the inflation rate before projecting the investment amount required to achieve the financial objectives. Provide the inflation rate that will range between 3% & 8%.
Step 7: Select the expected rate of return depending on the type of plan, which ranges between 6% & 15%.
Step 8: Click the tab “Next”, & the calculator will provide you with the amount that is to be invested on a monthly basis to accumulate funds for a certain period.
Conclusion
A child education planner is an easy-to-use online tool that helps parents calculate the amount required to be invested now to secure the financial future of their children. This calculator helps provide an accurate estimate of the funds required to be invested today to achieve your child’s future goals. It offers flexibility by allowing you to customise the available investment options, thus helping to make well-informed decisions.
