7 Ways Education Planning is Important for Your Child’s Future
Education is the foundation stone for a child’s future security. However, while every parent wants to provide their children with the best of opportunities, other expenses sometimes take precedence. Sending your child to college in today’s times requires planning, strategizing, and investing in the right kind of funds and instruments. It also needs a well thought of timeline and adequate revision and recalculation along the way. This can only be successful with a farsighted plan in place.
Here are 7 ways in which education planning is important for your child’s future.
1. It lets you provide your child with a good life
As stated above, education is essential in everybody’s life. It can bring bright prospects to your child’s future and offer them a chance to do well and live a financially comfortable life. However, education today is extremely expensive. Most parents begin saving for their children from the day they welcome them into this world. With proper and efficient planning you ensure that your children never compromise with their dreams. Careful preparation and execution allow your children to excel and get the tools that can contribute to their growth.
2. It lets you benefit from the power of compounding
Education planning familiarizes you with the many methods of saving for your child’s education. This could be in a bank savings account, a 529 education plan, or Roth Individual Retirement Account (Roth IRA), among other choices. When you start investing in an account dedicated to your child’s future education expenses, you capitalize on the power of compounding. This helps you build a considerable sum of money over the years without creating a heavy burden on your pocket. You can also have your relatives, grandparents, or spouse contribute to these savings, enabling your child to access the corpus and use it fruitfully when they come of age and need the funds.
3. It allows you to plan other expenses
With an education plan in place, you have a streamlined path to follow. This minimizes the chances of your other life goals coming in the way of your child’s future. If you do not plan your children’s education expenses separately, you may end up using your emergency fund or dip into money set aside for other things, such as buying a house or travelling abroad. This causes frustration and stress for you and deprives your kids of the wonderful opportunities that may lie ahead of them.
4. It reduces the pressure on your children
Without optimal education planning, your child has very limited options to choose from. A college education is costlier than ever right now and in order to get into a college, your child will either need a scholarship, a loan or apply for Free Application for Federal Student Aid (FAFSA). While these options have helped many students fulfill their dreams and ultimately find good jobs, it also creates pressure and anxiety in some. Getting a scholarship or financial assistance can be tricky. There is also no guarantee that your child will qualify for it. Loans too, come with their share of problems. Firstly, the rate of interest on student loans is quite high. Secondly, it can take years for your child to pay off the debt. If they were to lose their job after a few years of working or not find a suitable employment opportunity at all, they would find themselves knee deep in debt with no avenue to pay it off. A lot of students let go of their decision to attend college altogether because of these reasons.
5. It inculcates good financial habits in your child
When you plan and save for your kid’s education, you can simplify and structure your individual financial goals and expenditure. While having an education plan allows you to plan your finances better, it also teaches your children how to prioritize their expenses. Every penny that you save for their future brings in them a sense of responsibility. They value your contribution to their life and education and try to pay it back by working hard and achieving their dreams. They also learn basic principles of savings, investing, and frugality that can help them in their lives at a later stage.
6. It lets you stay ahead of inflation
Inflation can increase the cost of goods and services by leaps and bounds. With a rise in the price of education, it becomes increasingly necessary to not only save money for the future but also to find the means to let your money grow. With the right investment instruments, you can create wealth without hampering with your money’s growth. This does not create a dent in your savings when the time comes to use the accumulated funds to pay for fees or buy your child’s course-related materials and equipment, such as a laptop, books, lab apparatus, etc.
7. It offers direction to your children
Most parents start education planning well before their children decide what they want to study or become in their life. However, having a plan pushes your child to have a goal. When children watch their parents work hard, cut expenses, and save towards their future, they too start putting in extra efforts to study and lead a disciplined life. This can show them a direction and allow them to stay focused on the big picture.
To sum it up
Education planning is crucial and plays a significant role in your child’s life. It also offers you with a road map to align your income and expenditure resourcefully. This leaves no scope for overlapping of expenses, unfulfilled dreams, and financial stress. If you have a child or are expecting one soon, you should start planning for their education expenses early. The sooner you start, the bettercan be your standard of life and your child’s future.
In order to know how to save and invest and make the most of the different kinds of education savings accounts, you can reach out to financial advisors and take their help in picking the most beneficial option.