Parents’ primary priority is saving money for their children’s future. They devote much effort to providing their children with the most excellent possible upbringing. Parents want to make that their children get the greatest education possible. A child’s career might be put on the right path with the help of a decent course from a reputed college. However, the cost of higher education has increased tremendously in the past
Even if you don’t yet have children, it is usually preferable to invest in mutual funds plans early to ensure you can afford to pay for your child’s education. The earlier you start, the more likely you can bear the cost, whether you pay for the complete education or assist the children in making their plans for the future.
Explore Mutual funds
When you invest in mutual funds, you place your money in a financial vehicle that collects the funds of several investors and makes predetermined investments in various asset classes. This includes government and corporate bonds, listed company stocks, and other bonds. A qualified fund manager here manages your investment portfolio. Your choices about a mutual fund will rely on your financial objectives and risk tolerance; as a result, you must make this option after doing your research.
A mutual fund can be broadly classified as an equity mutual fund (where the money is invested in equities) and a debt mutual fund, depending on the asset class it is invested in (government securities, corporate bonds, etc.). An equity mutual fund is preferable for a long-term investment (18 years), with several fund categories available depending on your level of the risk level.
Factors to consider while Evaluating the Mutual Fund Option
The following factors will provide more information about the investment mentioned for the mutual funds interest rates so that you have a basic understanding of the mutual fund option available for your child’s education.
1# Lock-In and Withdrawal: When selecting a product, it’s crucial to consider the time your money is locked away and your withdrawal choices. Mutual funds in India outperform the other two in this regard since they have simple redemption procedures and no lock-in term (unless you participate in the Equity Linked Savings Scheme, which has a three-year lock-in period). One of the main benefits of mutual funds is the liquidity of the invested monies.
At any time, you have the option of withdrawing the entire amount if there is a demand. But two crucial considerations that must be made when starting money are the capital gains tax and exit burden.
2# Returns: Your earnings may be higher with mutual funds than with other investments. Mutual funds provide a wide range of options to consider despite market volatility. The fact that the investment amount is unrestricted is the best feature of this situation. You can therefore invest the necessary amount to build the capital. With an interest rate of 11% and approximate capital of Rs. 76.89 lakh, you will need to spend about Rs. 1.35 lakh yearly for 18 years.
3# Tax Implications: About mutual funds, all other schemes do not provide tax exemptions for you, except ELSS funds. Additionally, capital gains taxes must be paid on any returns or profit from the investment. The investment period will determine the tax percentage amount and whether it is long-term or short-term capital gains tax.
Benefits of selecting Mutual Funds
In light of the lengthier time horizon (18 years) we’re discussing here, you can decide to invest in one of the two categories of equity mutual funds listed below:
Mid-cap funds invest capital in mid-sized businesses with the potential to expand with a quicker production of earnings and higher returns over the long run. They still fall into the risk category, so you should approach them if you have a higher-than-average capacity for risk.
According to SEBI’s notification, Flexi-Cap Funds invest your money in securities with large, mid, and small-cap stocks. You can invest in various businesses, lowering your risk of financial loss due to market volatility.
The earlier you start, the more likely you are to be able to cover the cost, whether you pay for the entire education or assist the children in making their plans for the future. SBI Mutual Fund is the best mutual fund in India for parents to choose from while planning to invest in their children’s future education!
Watch the video above by sbimutualfunds for more details.
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