5 Reasons to consider mutual funds for child education planning

5 reasons why you must consider mutual funds to plan for your child’s education

Here are five reasons why you must consider mutual funds to plan for your child’s education:

• Mutual fund investments can help you beat education inflation: The cost of secondary and higher education is increasing at an alarming rate across the world. Education inflation should be your primary consideration while investing for your child’s education. Mutual fund schemes complement goal-based investing and are ideal for child education planning since they can help you achieve your investment goal in a specific timeframe. Even if you intend to take an education loan in the future to finance your child’s education in a foreign country, you can start a mutual fund investment to finance other costs such as flight tickets and accommodation.

• You can save up on tax through your mutual fund investments: In India, investors can choose specific mutual fund schemes to make the most of tax deductions offered under the Income Tax Act,1961. The capital gains that you earn upon selling your mutual fund units will be taxed depending on the category of mutual fund that you choose. Another advantage of choosing mutual funds for your child’s education is that you will only sell those units when your child is eligible for higher education. Therefore, you can benefit from long-term wealth generation while also saving taxes.

• Mutual funds are very flexible investment options: One of the many reasons why mutual fund schemes are popular in India is their flexibility. It is very easy to invest in a mutual fund and extremely easy to exit a mutual fund investment too. Mutual fund schemes offer flexible withdrawals, helping investors access their invested amount at any time. You can also invest in them via Systematic Investment Plans (SIPs) and follow a disciplined investment approach.

• They offer high liquidity: Mutual fund schemes offer higher liquidity as compared to other categories of investment. If your child requires access to instant funds, they can easily withdraw a fixed amount from a liquid mutual fund. In addition to this benefit, even after withdrawing an amount, the remaining amount in the mutual fund keeps earning returns. The extent of liquidity of mutual funds depends on their type.

• You can start your investment with a monthly amount of ₹500: One of the advantages of mutual fund investments is that you can begin a mutual fund SIP investment with just ₹500. Hence, these are affordable investment options.

Before selecting a mutual fund scheme, you must decide your financial goal, opt for SIP if investing for long-term goals like your child’s education, and use an SIP return calculator to know the right investment amount.

ALSO READ

ALSO WATCH