Soaring costs of education is a major concern for parents today. The best gift you can give your child is providing them with top-quality education so that their education is secured. However, a lot of parents are struggling with their mortgage repayments, meeting their daily ends meets and other expenses. So, they often wonder if they can afford a quality education in some foreign university for three to five years.
What if we tell you that with careful financial planning you can also provide your child the experience of obtaining quality education along with the experience of living in a new country and getting to know their culture. And no, you won’t have to go bankrupt. In fact, if you start early and invest in the right investment options, you can easily create a corpus to fund your child’s foreign education.
For foreign education, you are looking at a minimum of Rs 25 lacs of tuition expenses per year depending on the type of course you choose and the destination. Add to that living expenses and travel, and the costs can be pretty serious. Don’t assume that you have a lot of time until your child goes for foreign education. Instead start today to ease the burden on you to arrange for such a significant amount.
The investment strategy could be to invest a lumpsum in mutual funds today, and make regular investments in equity assets. Making a lumpsm investment will ensure that your funds grow at a faster pace due to the significant investment amount invested in your desired schemes.
How much to invest in mutual funds? – To evaluate the right investment amount for your child’s educational corpus, you can work backwards. Use a lumpsum calculator or an SIP calculator to understand the amount you need to invest to create enough funds. Do not forget to inflate your educational costs each year by using the rate of inflation. The usual rate of inflation is around 6 to 8% each year.
Where to invest? – Choosing the right investment product is perhaps as essential as saving the right amount. As, you have an investment horizon of at least 12 to 15 years, you might consider investing in mutual funds that expose themselves to equities. Equities have the potential to produce significantly higher returns than any other asset classes over a period of time. What’s more, the volatility associated with equity funds usually lessens when invested for a long duration. Choose a mutual fund scheme whose objectives are in line with your financial goals, investment horizon, and risk appetite. It is suggested to invest via SIP as they helps to automate your savings and invest periodically for the entire investment horizon. SIP investments help to instill financial discipline among investors.
To ensure that you do not get discouraged from regularly investing for your child’s future, experts advise to create a separate financial portfolio for your child. Happy investing!