Mutual Fund Unlocked: Investment for childs education

I am 35 years old and wish to invest for my child’s graduation. My child’s age is 5 years as of today. Can you suggest how I should invest in my child's higher education?
 
- Kushal Verma
 
Before starting an investment for the child’s education it is prudent to check two major things i.e. whether you have a contingency fund or emergency fund and are you properly insured. Having these funds in place would help you secure your investments.
 
There are many options available to achieve this goal. For instance, there are child plans provided by the insurance companies as well as mutual funds, people also invest in PPF for the same purpose, even bank FDs (Fixed Deposits) are used as an investment medium and so on. But it is always wise to choose a product which is efficient, effective and liquid. Investment in mutual funds is one of the methods which would help you invest in a very efficient manner with better liquidity than the above-said products.
 
It is also important to quantify your financial goals. As the actual amount for your child’s graduation is not available, you can consider that it would require Rs. 15 lakh in today’s term. But as you require the amount when your child turns 18, that is, after 13 years from today and considering the cost of education is also rising, Rs. 15 lakh needs to be adjusted for inflation.
 
So the amount required for your child’s graduation after adjusting for inflation is Rs. 36.15 lakh. The rate of inflation is assumed as 7 per cent. To achieve this you may opt the SIP (Systematic Investment Plan) route which requires you to invest Rs. 11,700 per month for 13 years or if you currently have Rs. 10.47 lakhs then you may invest this as a lumpsum to achieve your goal of child’s graduation. The rate of return assumed is 10 per cent and equity and debt allocation are assumed to be 60 and 40 per cent, respectively.