Planning for your child’s future is one of the biggest responsibilities as a parent. Education today has become expensive, and it will only rise in the years to come. This makes it important to prepare financially well in advance. A child’s education plan can help you secure funds for school, college, and even overseas education, but many parents make common mistakes while choosing one.
These errors can lead to inadequate coverage, missed opportunities, and financial stress later. Let’s go through the mistakes you should avoid, making sure your child’s dreams are not compromised.
Ignoring the Rising Cost of Education
One of the biggest mistakes parents make is not considering inflation in education costs. Fees for schools, coaching classes, and higher studies rise much faster than general inflation. If you plan only based on today’s expenses, the savings may fall short when your child actually needs them. Always factor in at least 8–10% annual growth in education costs while choosing a child’s education plan. This ensures the fund is realistic and can actually meet your child’s future needs.
Delaying the Start of Investment
Many parents postpone financial planning until their child is older. The problem with waiting is that it shortens your investment horizon. The longer you delay, the more pressure it puts on you to contribute higher amounts later. Starting early gives your money time to grow, and even small contributions can build into a large corpus with compounding. Whether your child is a toddler or in primary school, the best time to start is now.
Not Using a Child Plan Calculator
Parents often make random guesses about how much money they need for their child’s future education. This is risky and can leave a big gap in planning. A child plan calculator is a simple online tool that helps you estimate how much you should save based on your child’s age, expected education costs, and years left until admission. Skipping this step can mean underestimating or overestimating your needs. Taking a few minutes to use a child plan calculator can give you clarity and make your plan more precise.
Choosing a Plan Without Assessing Your Risk Appetite
Every parent’s financial situation and comfort with risk are different. Some may prefer safe, guaranteed-return plans, while others are open to market-linked options that can potentially generate higher returns. One mistake is blindly picking a plan without considering your own risk tolerance. For instance, if you are not comfortable with market fluctuations, choosing a plan heavily linked to equities may cause stress. On the other hand, being too conservative may not beat inflation. It’s important to strike a balance.
Overlooking the Insurance Component
A good child education plan is not just about savings and investment; it also provides insurance coverage. This ensures that if something unfortunate happens to you, your child’s education is not affected. Many parents overlook this feature and only focus on the savings part. Always check whether the plan offers life cover, so your child’s education is secure even in your absence.
Not Reviewing the Plan Regularly
Education goals may change with time. For example, your child may initially want to study in India but later decide to pursue higher education abroad. If you set your plan once and never review it, you may not be prepared for these changes. It’s important to review your plan every few years and adjust the contributions if needed. This helps you stay on track with your goals.
Focusing Only on Returns
While high returns are attractive, they should not be the only factor in your decision. Parents often get carried away by promised numbers without checking flexibility, withdrawal options, and protection features. Sometimes, a plan with moderate returns but better liquidity and insurance may be more suitable for your needs. Always consider the bigger picture rather than chasing returns alone.
Not Planning for Emergencies
Another mistake is ignoring the possibility of unexpected situations like health emergencies, job loss, or other family responsibilities. If you don’t have an emergency fund, you may be forced to dip into your child’s savings. This can derail the education goal. Keep a separate emergency fund so that the money meant for your child’s education remains untouched.
Relying Only on One Option
Some parents put all their money into a single plan and expect it to cover all education costs. This is risky because no single option can provide all benefits. Diversification is important. You can combine a child’s education plan with other investment tools like fixed deposits, SIPs, or bonds. This way, even if one option underperforms, others can balance the shortfall.
Conclusion
Selecting the right financial tool for your child’s future is not difficult, but it requires careful thought. The most common mistakes include ignoring inflation, delaying the start, avoiding a child plan calculator, and focusing only on returns. Remember, a good plan is not just about investment but also about protection and flexibility. By starting early, reviewing regularly, and planning realistically, you can ensure that your child’s dreams are supported, no matter what life brings.
