Parents want quality education for their children as it lays the foundation for the bright future of their children. In recent years, the cost of acquiring quality education has risen drastically, and many parents are struggling to facilitate finances for the higher education of their children.
In India, a student undergoing higher education costs around 18.3% of an average urban household’s income. However, only a small percentage of parents plan for their child’s education. It is essential for parents to have a financial plan that allows children to fulfill aspirations. Hence, here is a way known as loan against property through which every parent can provide their child with the best education. In this blog, we are discussing five easy ways that can help you finance your child’s higher education.
5 Tips to Plan for your Child’s Higher Education:
- Go for a mix of investments- One of the most important things a parent can do is to explore and look for investments that can yield high results. There are many investment options, and it is necessary to use a combination of both risky and safe investments. Reading financial papers and blogs is an excellent way of developing an understanding of the market. For example, with a well-calculated and timely start of a SIP or mutual funds, you can effortlessly fund your child’s entire higher education. You can also opt for a fixed deposit scheme, which is one of the safest options. However, the return may be lower as compared to a SIP. Remember, the earlier you start more will be the benefits!
- Explore education and personal loans– Lenders are usually ready to fund an education loan up to 80% of the fees – but the amount will vary across lenders. This means that you still have to fund 20% of the remaining expenses. Suppose the entire cost of your child’s higher education in 20 lakhs; you can opt for a 16-lakh loan and the remaining four lakhs can be funded through your savings or a personal loan. The biggest benefits of an educational loan against property lie with the fact that the loan tenure can be up to 15 years, and the entire amount is disbursed at one go. Personal loans, on the other hand, have tenures of up to 5 years.
- Use your assets- Apart from the other two loan options, you can use an asset like immovable property or shares to fund the education. For example, if you meet the loan against property eligibility criteria, you can get sanctions for loan amounts of INR 4,00,000 and more, quite easily. If you own a house, non-agricultural property, flat, shop, or any real-estate for that matter, you can put these up as collateral and take a loan. The interest rate is lower as compared to other loans, and if there are other owners of the property, then they all need to be co-borrowers.
- Rely entirely on savings– You can fund your child’s entire education through savings, but, there a few key steps that you have to follow religiously. You should take the help of a financial analyst to create a savings plan. The first step to start saving for higher education is to set a target. One option is to set a fixed amount every month and earn compounded interest over the years. Remember, you have to start early and save aggressively.
- Finance the costs entirely with your income– This option is possible for only a few people who earn a high income and can afford the high fees charged by colleges and universities. If you earn a handsome salary or are involved in a successful business, it may be possible for you to finance your child’s higher education by relying entirely on your savings.
In a recent study, it was concluded that education-related expenses have risen by 150% since the past ten years. Today, Indian parents spend a considerable amount of time worrying about their child’s future and their ability to finance their child’s future aspirations. Some of the above options can go a long way to help plan for and fund the fees and other expenses related to higher education. Must check the loan against property interest rates of different lending institutes before taking a loan. So, saving and investing for a child’s higher education has to be the foremost financial goal for parents! In the end, if children experience any hurdles in their path, a lack of finances shouldn’t be one of them.