5 Easy Steps to do your Child’s Education Planning

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5 Easy Steps to do your Childs Education Planning
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• Child Education is one of the biggest goals of
  parents these days because of the tough
  environment and high expenses involved. Most of
  the parents start saving for Child Education
  right from the birth of Child, which is a great!
  In this post we learn how you should evaluate the
  target cost of Children Education and how you can
  achieve the targets within expected deadline. We
  are mainly talking about Higher education in this
  article.

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Step 1 Set a Target Date

• The first step is to find out the target date for
  the child education goal. I feel the that average
  age when a child goes for Higher education can be
  taken as 21 or 22. You can take your own target
  tenure depending on your expectations and
  situation. If you are not yet married then find
  out the estimated time left for your marriage and
  when you want to start your family (i mean
  children) and add target years to that number.
  For me personally it would be 4 21 25 yrs.
  what about you?

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Step 2 Set a Target Amount in Todays Term

• The next step is to determine how much does it
  cost in todays value for giving education to
  your child. All of us have different aspirations
  when it comes to our child education, courses
  like MBA, Engineering, MBBS, Software related
  courses are on our minds. So lets say for
  example you determine that Rs 10 lacs is good
  enough to provide a good education to your child
  in todays value. Now you can jump to next step,
  but before that make sure you understand the
  effect of inflation on our Money. Here is another
  good article on Inflation

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Step 3 Find out the Amount you need on target
date

• Next step is to find out how much amount you
  actually need in the end. For this you first need
  to determine the rise in child education plans
  cost per year. As per the recent year numbers,
  Education costs are increasing at 10 per annum.
  A decade ago you could have done an MBA at 1.25
  or 1.5 lacs, but today it costs more than 4 lacs.
  Thats more than the average inflation. Education
  cost in our country has been increasing at higher
  speed than other things. so you need to consider
  some figure. I would like to take this as 10.

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Step 4 Estimate the return which you can
generate over your investments

• This is an important step where each investor has
  a different level of risk appetite and knowledge.
  Depending on those factors one can choose
  different products for investments and can
  generate some return through it. One who is not
  much interested in finances and has lesser risk
  appetite can choose Balanced Funds or Debt Funds
  and can generate around 10-11 returns. On the
  other hand a person who can take more risk and
  have more interest in finances can invest in
  products like Equity Mutual funds, ETFs, Direct
  Equities etc and can target close to 14-15
  returns.

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Step 5 Calculate per month Contribution

• The next step is to find out what is the monthly
  contribution you need to do. For this you have to
  use this scary formula.
• C FV r / (1r) (1r) t 1
• Where
• C contribution per month
• r Rate of return you expect to generate on your
  returns .
• t tenure (It would be multiplied by 12 if
  payments are monthly)
• FV Future value of your goal (this is
  calculated in step 3 .
• You can Use this Calculator to calculate these
  figures. Just fill in your details and get the
  output. Now you can invest this money in product
  you have chosen.

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Source http//www.jagoinvestor.com/2010/01/5-easy
-steps-to-do-your-childs-education-planning.html