Here are some tips on how to plan for your child's graduate studies

When it comes to children, every parent would like to give them the best of everything.

 As a parent you need to plan to provide funds. Some degree courses, such as medicine and engineering, architecture, can be very expensive. If the actual requirement turns out to be lower than what you planned for, the balance can be redirected for other goals.

For post-graduation studies, the education can be funded by a loan, where the parent can be a guarantor. As the student would start working right after the post graduate studies, he or she can repay the loan in installments when the earnings start.

Start early  : If you start early and invest the maximum you can, the effect of compounding will create a better corpus over time. For education of your child, you can start when the child is born. If the funds are not sufficient at the beginning of your career, start allocating funds as you progress. It is possible to plan for education at later stages, too, but the allocation of resources required will be very high. The portions of your investments earmarked for funding education should be sacrosanct and not be utilized for any other purpose.

Instruments : You have to be prudent in your choice of investment vehicles. Emotional advertising is very much in vogue to lure you to products which say they'll help fund your child's future, especially unit-linked insurance plans. Products which have the name 'children's plans' may actually not be necessary or suitable to fulfill your needs. You need to understand the underlying asset and strategy of the product before jumping in to buy one.

If you have already invested in a Ulip, you need to stay invested for the complete tenure of the fund and keep contributing to it regularly. If you withdraw it before the tenure, the initial costs may eat into your returns. Since the tenure available is very long, in most cases more than 10 years, investments in equity should work well.

Land or property is a favorite among many for long-term goals. The initial outlay will be very high. It can give good capital growth over longer periods, but is very illiquid. Public Provident Fund is an excellent product in the fixed returns category. An investment of Rs 70,000 per annum over the 15-year duration, with an annual compounded return of eight per cent, will give you about Rs 20 lakh.

You can plan your investments well, but if you miss out on protection strategies, all your planning will go waste. Adequate health and life insurance can keep your plans viable even in the unforeseen circumstances of disability or death. As the time for the need of funds gets closer, you need to give paramount importance to preservation of capital and move from riskier assets to risk-free/low-risk assets, to protect the growth accumulated over the years.

Source : Rediff Business