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How to Start a College Fund for Your Child

You had kids. Congratulations—you just acquired the single most expensive, high-ROI asset of your life. You work hard for them, dream big for them. But then you make one classic mistake: you dump all your savings into one giant “general bucket.”

And when everything sits in one bucket, your brain becomes an all-access pass. New phone? Sure. Weekend getaway? Why not. Fancy coffee subscription? Obviously. This is how education money quietly leaks into lifestyle upgrades.

Behavioural finance has already decoded this: if money isn’t labelled, it gets spent. The antidote? Create a separate, sacred, untouchable college fund.

Name it. Literally.
“Aarav’s College Fund.”
“Meera’s MIT Mission.”
Once you label it, you won’t touch it. Because taking money from a named fund feels like stealing from your own kid—and no parent wants that kind of guilt trip.

A separate fund forces discipline. It ensures your child’s education is protected from your impulses. It also gives your investments time to grow at 10–12%, instead of being cashed out for the next shiny thing on EMI.

And remember: a real college fund needs protection too—term insurance and health insurance act as the security guard. Without protection, it’s just a plan that hopes nothing goes wrong.

The US figured this out years ago with dedicated 529 plans. In India, we still behave as if “savings” means “money that will mysteriously disappear over time.”

Your child’s future deserves a firewall. Build it. Name it. And once you create it—don’t touch it.

Here is the step up step guide on how you can create separate college education fund for your kids

Step 1: Estimate the Total Cost of Education

Project how much you’ll need when your child starts college. Consider:

  • Course type: engineering, medical, management, arts, etc.
  • Location: India vs. abroad (tuition and living costs vary widely).
  • Current fees: shortlist target colleges and note present costs.
  • Education inflation: typically 8–12% p.a.

Step 2: Define the Time Horizon

Most students begin college at 18–20 years. A longer runway lets compounding work harder for you.

Step 3: Choose the Right Investment Options

  • SIPs (Equity Mutual Funds): best for long-term growth via rupee-cost averaging.
  • Gold / International Funds: diversify against domestic concentration.
  • PPF: tax-free and government-backed—ideal for conservative allocation.
  • Sukanya Samriddhi Yojana (SSY): attractive interest + tax benefits for girl children.
  • Fixed Deposits (FDs): low risk, lower returns—best for stability, not growth.

Step 4: Calculate the Monthly Investment

Use the College Fund Planner to compute a personalised SIP.

Illustration:

  • Invest ₹21,000/month for 15 years → corpus ≈ ₹1 crore.
  • Delay start by 5 years → need ₹44,000/month for the same ₹1 crore.

Compounding reward goes to early starters.

Step 5: Open Investment Accounts & Choose Next Steps

  • Create a dedicated education fund separate from savings.
  • Consider investing via an HUF to optimise taxes.
  • Diversify across equity, gold, and PPF/FDs.

Step 6: Monitor and Adjust Regularly

Review annually. Increase contributions after salary hikes, rebalance if equity drifts too high/low, and adapt if goals change.

Step 7: Teach Your Child About Money

Include your child in age-appropriate discussions about saving and investing. It builds responsible habits early.

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