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Planning FOR YOUR CHILD'S EDUCATION Read on to explore possible ways of prudent Saving and Investment for your kid’s education, while covering the probable risks involved.

Human tendency is to provide the finest possible for our children — be it education or be it amenities. Parents try their best to provide the former to a greater extent, since education in today's perspective implies that the future of the child is going to be more secure than by just a simple provision of facilities. So if education is imperative, why should individuals not save for it in advance? Costs of education are on a rise (may be not in sync with the inflation factor, but still they are increasing every year). For many families, the cost of college education must be planned well in advance (after all you must take the benefit of that magic word called compounding!). Because unless you are doing a planned saving for your child's education, you may just as well end up in a somewhat sticky wicket.
So what is the amount required to be an engineer, or a doctor, or anything that you assume your child would like to pursue? Variable is the answer. But the simplest way to do it is to do a small research on your own, or through an advisor, on the relevant amounts in today's perspective. Let us assume for ease of calculation that the amount that is required in today's value is Rs 10,00,000. Now if we were to assume an inflation factor of 5% (for the sake of calculation — exact amounts may actually vary), then what you really need to save for, assuming again that your child gets into college after 15 years, is Rs 20,78,000 approximately! This comes as a shock to quite a few people.
In a survey done by IIEF, in association with CMIE, it was found that 70% of the people were not aware of an inflationary factor, while planning for their financial goals, and a whopping 74% were unable to find unbiased advisors who could guide them in a relevant manner. Both these factors are relevant when one sees that towards the end of the period the amount saved is short of what was required.
So coming back to where we left it — unless I take an inflation factor while considering the final amount that will be required, I might end up saving an amount which is actually lesser. In our example, one could have actually saved just about half of what was required. So it is extremely relevant to take in inflation while considering a financial goal like education.
Secondly, if you were to work backwards to arrive at the amount that would be saved on a monthly basis, you should also consider a compounding factor, since your returns would have to be rolled into a good returns scenario.
So what are the options available at this point in time, while we are looking at saving for our children's education? I think that the options can broadly be divided into two aspects. One is to actually cover the risks in one's life to make sure that the plans that you have for your child is actually met — with or without you. For this there are a number of options, where you can find specially designed insurance policies which ensure that your child does not face any hardship in meeting the education goal that you dreamed for him or her. And insurance policies also provide a tax free income at the time of maturity. Some of the policies that could be considered are LIC's Komal Jeevan, ICICI Pru's Smart Kid, Tata AIG Life's Career Builder and Mahalife Junior, apart from many other offered by a host of insurance companies.
The second option is through systematic investing. This could be in various instruments that would offer market returns. This is more of an indirect way of saving for the education goal, since you are looking at creating wealth, and earmarking investments that would be liquidated at the time you need the money to fund your child's education. This would enable you to keep saving with a specific goal, and taking advantage of the fact that the market could offer returns that could be higher depending on economic factors. ICICI Pru's Lifetime, and Systematic Investment Plans of various mutual funds are an extremely pertinent mode to save for specific goals. You should look at fundamentally right funds, and only pursuant to good advice, invest in those. One thing to remember is that investment in market related instruments should be made only after considering your risk taking ability (which again depends on a host of factors), and while you are at it, do it based on an ideal asset allocation.. Be wary of any person who asks you to invest for an important goal like your child's education, without gaining an understanding of your your child's education, without gaining an understanding of your entire picture. The reverse of the above is equally true - implying thereby that unless you actually tell your advisor the true picture, he may not be in a position to do justice to your portfolio.
So, to sum up, if you were planning to save for your child's education, consider that inflation will eat your money, save and invest regularly and in a disciplined manner, and do that by covering your risks too. In a nutshell, do not go out and play till you have your guard on, and once that is done, score your century, and give your child his best gift - a great education.