Invest early

Higher education in the fields of medicine, engineering or courses in overseas locations can cost you exorbitantly 15 years from now. Assuming a modest inflation rate of 6%, a degree in medicine which costs around Rs. 10 lakh today, will cost Rs 28.54 lakh in 18 years.

Accumulating savings of this enormous size seems a herculean task, but can be achieved if you start early. If you invest in a portfolio that yields a return of 11 percent, it will generate savings of around Rs. 28 lakh. Since bank deposits offer low interest rate they would not be enough after factoring in inflation and taxes.

Avoid child plans by insurance and mutual fund companies

ULIP child plans are not recommended by financial planners because of high costs, low liquidity and low transparency levels. Child plans by mutual funds are also not recommended by planners due to their inconsistent track record and low assets under management.

Also, you are penalized if you exit these plans early. Child Plans by mutual funds are largely balanced funds but not similar to regular balanced funds since the asset allocations are different.