We are living in a world that is driven by Volatility, Uncertainty, Complexity and Ambiguity. In other words, everything is uncertain and prone to volatility, including your investment planning and goals. Keeping that in mind, make sure to be flexible when planning and investing in your child’s future education.

Education can be expensive, especially if your child is planning to join a foreign college or university for higher education. Planning well in advance and keeping the scope for uncertainty is a good way to go.

As you may be aware, children’s goals and dreams are never fixed. Your child may want to become a pilot when he’s young but might choose a completely different career when the time comes. This is why your planning for a child’s education needs to be flexible and as accommodating as possible. Here’s how to best plan for your children’s higher education in an uncertain world like ours.

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Get as close to the education goals as you can

You do not have to be exactly right or choose the exact career path your children will take right now. But, you need to have an idea of it and should plan accordingly. The best way to go about it is to plan for the most expensive education goal that your children have the highest chance of choosing. For instance, your child might want to become a doctor in the future, so you should enquire about how much the education will cost at that time and plan your investments accordingly.

Moreover, you should reassess your education goals and financial planning at least once every year to make sure that you are on the right track to achieving the goal.

Diversify your investment

This needs to be said as many times as possible. Make sure that your investment portfolio, including your education investment, is well-diversified across different asset classes, including foreign assets if possible. This will not only help mitigate the volatility risk of markets but also ensure that your money grows in multiple ways.

The cost of education is only going to increase with time, especially if you want admission to one of the prestigious international universities. So, you have to prepare for the worst and invest accordingly.

In addition to keeping your investments diversified, you might also want to take action to limit risks so as to not lose everything in case of unpredictable events such as the COVID-19 pandemic.

Keep a backup plan in case things go wrong

You may have invested sufficient for your child’s higher education, but you still have a backup plan ready in case things go wrong. For example, your investments might be in loss when you want/need to redeem them and you might have to look for alternatives such as an education loan, while you wait for the market to recover. Having a Plan B, like investing in some relatively safer options such as government schemes and FDs when diversifying your folio can turn out to be a saviour in tough times.

All and all, you should be prepared for the maximum predictable goals when it comes to your child’s education. Keep topping up SIPs and invest as much as possible to prepare your finances for uncertainties.

Authored by Amit Gupta, MD, SAG Infotech

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