FD for Education: A Guide to Uses and Benefits

That dream university or college of your child can be a reality if you start saving from today. The rising cost of education not only urges you to plan ahead but also to choose smart saving and investment options. A Fixed Deposit (FD) is a straightforward and reliable option to get started.  

With an FD, you secure a fixed interest rate over a set period, allowing your savings to grow steadily without worrying about market risks. This kind of stability can be crucial when saving for major expenses like education. Opting for long-term FDs can help accumulate a larger sum, making a significant contribution towards future tuition or other related costs. 

How can you use the FD for education? 

As a parent, planning for your child's education is an important step you can take. Fixed Deposits (FDs) offer a reliable way to ensure that you are financially prepared for the various stages of their education. Here are specific ways you can use FDs to manage educational costs: 

Tuition fees 

You can set up an FD to mature around the time your child starts college or university. This allows you to use the lump sum to pay for their tuition fees without taking on debt.  

Accommodation 

If your child is moving away for studies, you can use the FD to cover their hostel or rental fees. The maturity amount can provide a substantial cushion to manage these expenses comfortably. 

Study supplies 

With FDs offering regular interest payouts, you can use this interest to cover ongoing expenses like textbooks, laptops, and other study materials. This ensures that your child has everything they need to succeed academically without you needing to dip into other savings. 

Extracurricular activities  

Education is not limited to classrooms. Extracurricular activities and coaching for competitive exams often involve additional costs. With a fixed deposit, you can save and meet these expenses without disrupting your budget. 

Studying abroad 

If your child plans to study outside India, an FD can help you prepare for higher tuition and living costs. This ensures you have the funds ready for international fees, travel and other costs. 

Repaying loan 

If you take an education loan for your child, the maturity amount from an FD can help you repay the loan quicker or manage EMI payments. This reduces the financial burden and ensures you stay on track with loan commitments. 

Emergency needs 

In case of unforeseen education-related expenses, you can make partial withdrawals or take loans against FDs. This flexibility allows you access to funds without having to break the FD entirely, ensuring your financial plan stays intact. 

How beneficial are FDs for managing education expenses? 

Guaranteed growth 

FDs offer a fixed interest rate, meaning your money will grow at a set rate over time. You don’t have to worry about your savings going up and down with the market. This makes it easier to plan for things like tuition fees. 

Safe and secure 

FDs are a very safe way to save money since your original deposit is protected. Unlike riskier investments, your money in an FD won’t lose value. Therefore, it is a good choice for long-term goals like education. 

Flexible tenure 

You can choose how long you want to keep your money in an FD, from a few months to several years. It allows you to pick a timeframe that matches when your child will need the money for school or college. 

Access to money when needed 

If unexpected education expenses come up, you can either break the FD early (with some penalty) or take a loan against it. This way, you can get the funds when you need them without losing all your savings. 

Regular payouts 

FDs allow you to receive interest payouts every month or quarter. If you have a substantial FD amount parked, you can cover regular education expenses like school supplies, books or extra coaching fees from the interest itself. 

Loan facility  

You can also apply for a loan against FD in case of an emergency. This ensures that your child’s education remains undisturbed.  

Endnote

To build an effective strategy, split your sum into different FDs with different tenures. It will provide you liquidity at various stages, which you can further reinvest at potentially higher rates. Other than that, align the FD maturity period with your child’s educational milestones. For instance, use long-term FDs when your child is young and shorter-term as they near college. These tips will help you earn steady growth and ensure liquidity when you need it most.