As a parent, thinking about your child’s education is always on top of the mind and it is crucial to plan early for it. And for that, leveraging your savings account to build an education fund can be a good starting point. It provides safety and liquidity, allowing easy access to your funds when needed. To provide your child with the best schooling, college and higher education, you can open a savings account and build a sizeable corpus.
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Safety of principal
Savings accounts are a secure and risk-free way to save for your child’s education. This is because the funds are not subject to market fluctuations. So, you can rest assured that your principal amount is protected. It is a guaranteed source of funds for future educational needs.
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Steady Growth
Though savings accounts offer modest interest rates compared to other investments, they are still a reliable option to grow your funds over time. There are many banks that offer competitive interest rates for savings accounts. By choosing an institution that provides higher interest, you can ensure that your education fund steadily increases without any risk.
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Immediate accessibility
The key advantage of using a savings account is the easy and penalty-free access to your money whenever needed. You can instantly withdraw funds to pay for school fees, uniforms or extracurricular activities, without worrying about long lock-in periods or early withdrawal fees.
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Teaches financial responsibility
You can also involve your child and teach them about financial management from an early age. Savings account for your child’s education provides a valuable opportunity to introduce concepts like saving, budgeting and setting financial goals. This will make sure your kid learns about financial independence and responsible money habits.
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No contribution limits
There are certainly no restrictions on how much you can contribute to a savings account in India, unlike education schemes. This way, you can save at your own pace and adjust your contributions based on your financial situation.
How to leverage a savings account for a child’s education?
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Start early and make contributions consistently
You should create an account separately for your child’s education. You can open a zero balance account online as there is no minimum balance requirement and managing it digitally offers convenience. You can do this at the time of your child’s birth. This will give you a head start to accumulate more funds and benefit from compound interest. One thing you can do is set up automatic transfers from your main account to this savings account each month. This will help you build consistency and discipline without requiring manual effort.
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Use a savings account for making investments
Once you’ve built a substantial corpus, it’s wise to combine it with other investment options for higher education, such as fixed deposits (FDs) or Public Provident Fund (PPF). You can allocate short-term savings for immediate needs and invest the rest for higher returns over the long term. You can even get loans against these investments, which provides a safety net for large education-related expenses, such as college tuition or study abroad.
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Monitor and adjust contributions
You should regularly review your contributions and adjust goals based on your financial situation. If you receive bonuses or windfalls, consider adding a portion of that to the education fund to boost savings. Furthermore, keep track of education costs and inflation to adjust your savings goals accordingly. For example, plan your savings based on current and future estimates, check if there is a rise in education costs.
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Have an emergency fund
To address sudden needs, such as additional school fees or extracurricular activities, without disrupting your overall savings plan, build an emergency fund. Having a buffer ensures that you don’t have to dip into long-term investments or incur debt to cover unexpected educational expenses.
Endnote
In choosing the savings account for your child’s education, it is important to take into account the different factors to get the most out of it. Firstly, find an account that has a better interest rate so that you can earn more as your deposit amount increases.
Also, target accounts with little or no fees so that you do not end up losing your money through monthly charges. Also, look at the account’s liquidity and convenience, you can withdraw the money when education costs are due.
Last but not the least, see if there are any special children’s savings schemes available with the bank because they may have some additional benefits, such as a higher rate of interest or some educational benefits. Based on these factors, you can select the savings account that will suit your needs and help your child in his or her education.
