How much funds?
Depending on your child’s (children’s) current age (s), you may be able to get an idea of what he/she (they) want (s) to do and then get an idea of the associated cost. Children though often change their mind or life direction from their initial childhood dreams to practical reality, depending on their abilities. Therefore, it is possible that what you initially plan for may have to change. Nevertheless, some sort of idea may serve as a benchmark/guide as to how much funds need to be accumulated. If your child (children) is (are) too young to give you an idea for instance, if the child is anywhere between baby and infant, you may choose to regularly put aside an appropriate amount which you can afford, in a fund which will generate positive returns.
Investment Strategies
When deciding on where to put your funds, there are certain issues you will consider. Firstly, there is the issue of whether your savings goals is short-term, medium-term or long-term. This will depend on the age of the child. The younger the child, the longer the time you may hold the investment. The longer the term, the greater the potential for higher returns.
You will also need to consider the return, risk and liquidity of the financial instruments within which you plan to invest for your children’s future. The greater the risk, the greater the potential for better returns. Also, it is common for higher interest instruments to be less liquid than lower interest instruments. If you have a long time till your child would be in need of the education fund, you may invest in longer term instruments with greater risk but greater expected return. Although there may be greater risks involved and more fluctuations in the fund, because of the long term of the investment, the fund is likely to have an overall positive return over the long term.
