Most Indian families place a high value on ensuring their children receive the greatest possible education. The best universities and institutions in the world may be found all throughout the world. The competition for admission to Ivy League universities is fierce, and the prices associated are prohibitive. In this case, parents need to plan for their child's education abroad by establishing an education fund. To accomplish this, follow these steps:
Make an accurate cost projection-
Consider first how much money you want to put into the school fund of your child. Then work your way backwards from that point. There are two things to bear in mind if your child is in school and has at least 10 years to go. While it's unclear the direction your child will take, you have the luxury of time and money to save for it.
It's a good idea to look at the pricing of some of today's most popular courses at some of the nation's best institutions. Colleges charge for academic inputs as well as for living expenditures, which are included in the cost of education. The expenses are spread out over the duration of the course and are subject to inflation. Experts believe that when assessing costs, it's important to account for inflation of roughly 4% and currency depreciation of around 3%. According to the latter, the rupee has generally devalued against the dollar at a pace that is higher than that of the course fees and living costs.
Assuming a child enrolls in the same school 15 years from now, the expenditures come to Rs 4.3 crore after taking inflation and currency depreciation into account.
Invest Frequently-
You're off to a good start if your estimate is accurate and you have enough time to complete the project. The less money you have to put up each month, the more time you have.
If you want to save Rs 4.3 crore over 15 years and expect a 15% return on your assets, you'll need to set aside Rs 63,528 a month. You can see from the table above how much money you'll need to set aside each month.
Your Best Chance is to Invest in Equities-
The sums presented look to be excessive. But don't give up hope. You might begin saving slowly and progressively raise your contribution over time to compensate for a shortfall. Moreover, in some situations, scholarships, tuition exemptions, and school loans are available.
In spite of the current volatility in the equities markets throughout the world, the long-term stats are excellent. The Nifty 50 and Nasdaq 100 indexes have returned 14.46 percent and 20.93 percent, respectively, during the previous 15 years ending May 31, 2022.
If you're going to invest in stocks, stay away from those that have performed well in the past. Because of the recent volatility in the stock market, do not avoid investing in shares. Staying the course and not attempting to time the market makes sense.
Keep your eye on the prize-
Though exposure to equities ― both local and international, give a possibility to achieve significant profits, they also come with volatility. Doing so entails maintaining an eye on the portfolio. Debt investments, which earn less than stocks but are also less volatile, will be necessary as you get closer to your objective. One of the most tax-efficient ways to invest in debt is through debt mutual funds.
Fixed Deposits (FDs) may also be considered by conservative investors for debt allocation. If you're okay with the liquidity limits, an existing Sukanya Samriddhi account can be utilised to invest in debt for school funding for girls.
Education costs must be closely monitored in order to see how they evolve over time. Every now and again, you need to check your assumptions about inflation and currency devaluation. Investments should be increased when there is a gap.
Don't neglect the uncertainties of life when making all of these investments and keeping track of them on a regular basis to help your child reach his or her educational goals. Invest in enough term life insurance early in life. Your child's education will be met even if you are not there.
Saving for your child's education is an excellent idea, even if you can get a student loan. It's a great way to avoid spending retirement savings that you can't get anywhere else.
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