Just picturing your kid’s life in the years to come probably puts a big grin on your face, doesn’t it? Everyone dreams of giving kids the best they can get: a nice school, an excellent college, and the liberty to chase their dreams. But it isn’t a secret that education costs are skyrocketing in India.
That’s when a child insurance plan proves helpful. It’s a way that ensures you have money set aside so when your kid is ready for college, you will have the necessary funds without any struggle. You may be wondering, though: How do you estimate the right amount to save? A child education plan calculator is a handy tool for you in such a situation. We have put together a few simple steps to explain to you how to make the best use of this tool.
What is a Child Education Plan Calculator?
Imagine the calculator as your “future-predicting device.” It is a complementary digital tool available on lots of insurance websites. You give it some information about your present situation, and it calculates for you the amount of money you will be requiring in the future.
The main benefit is you don’t have to make rough guesses. Instead of saying, “I wonder if I will have enough,” one can confidently say, “I am sure that I am doing the right thing.”
Step 1: Start with the Age
At first, the child education plan calculator will want to know the age of your child.
Why it matters: In case your toddler is 2 years old, you will roughly have 15 years for saving. If your kid is 10, then you are left with 7 or 8 years only.
The Rule: It is always a good idea to begin early because that is when you will be able to save a smaller sum every month as your money will have more time to grow.
Step 2: Pick a Goal
What does your kid aspire to be? Surely, a toddler can be an astronaut one day and a chef the next. Since we are still uncertain, why don’t we consider the price of professional courses like Engineering, Medicine, or Arts in India these days?
Type in the “Current Cost” of the desired degree in the calculator. Most calculators have a drop-down menu to help you select a career path.
Step 3: Remember About Inflation
This is the most crucial step. A university degree that costs ₹10 Lakh today won’t be the same 15 years from now. Every year, prices increase. This phenomenon is called inflation.
When you use the child education plan calculator, you will be able to spot a slider for inflation. In India, the education sector usually sees an annual cost increase of about 8% to 10%. It’s a good idea to set the inflation rate slightly higher.
Step 4: Check Your Savings
The calculator will inquire whether you have already saved some amount for this goal.
- If you possess a Fixed Deposit (FD) or gold and other precious metals, state the amount.
- The tool will deduct this from your final goal and will indicate the “difference” you still have to cover.
Step 5: Discover Your Monthly Amount
After you press the “Calculate” button, the magic will unfold. The tool is going to give you a large figure (the future price) and a smaller figure. This lesser figure is your aim. This is the amount you should plan on investing in a child insurance plan.
Why Should I Use a Child Insurance Plan?
Using a child insurance plan over a simple bank account has several benefits. Firstly, it is specifically designed with parents’ needs in mind.
- A Safety Net Automatically Kicks In: Parents’ death or disability is usually the scenario most parents worry about. Guess what? Most of these products allow you to stop payment of premiums but keep the cover and the maturity benefit intact. So even if you are no longer there, your loving ones are well taken care of.
- Regular Saving: It encourages you to be disciplined with your saving habits.
- Tax Benefits: These might be tax-efficient too depending on the country you are living in; for example, in India these are quite popular for their tax benefit features.
Getting the Best Results
You can use these three guidelines along with the child plan calculator to get your best results:
- Set Your Budget Realistically: Don’t tempt yourself to select the highest monthly saving that you can’t afford. Quite the contrary, it is better to have small but regular savings than large savings for a couple of months only.
- Annual Review: Just think how life can change in a year! Perhaps you have been given a salary hike or education costs have once again increased. Check the calculator once every year, and if necessary, adjust the savings amount accordingly.
- Factoring in Additional Expenses: Education costs entail a lot more than tuition fees alone. Think about the hostel, books, and travel. You should be aiming to add a little extra for these ‘hidden’ expenses to your goal.
Mistakes to Avoid
- Procrastinating: For most parents, the starting point is the child’s entering high school. However, by then the amount to be saved monthly is typically very high and difficult to manage.
- Not Accounting for Inflation: If you only save for what prices are today, you might end up having only half of what you need when the time comes to pay for education.
- Refusing to Use a Calculator: Taking a guess is a dangerous thing. It only takes two minutes to use a child education plan calculator,, but it can really save you years of stress.
Conclusion
Your child is dreaming big, and as a parent, it’s in your hands for the dreams to become reality. Planning doesn’t require you to be a math whiz or a financial guru.
A child education plan calculator can help lay down a precise route for your journey. It will show you your exact location and your destination. Having your figure, pick a reliable child insurance planbeforer beginning your trip.
