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The biggest investment considered for a parent is the investment in his/her child’s education. And for the same purpose, parents start saving money right from the first birthday of their child or right from their birth. However even after lifelong savings, many parents find it difficult to send their child abroad as the savings are usually not sufficient, to cater abroad education expenses.

We are living in a phase where one thing grows for sure and that is inflation. Similarly, education inflation is also rising not only for higher education abroad but also for secondary education and higher education in the country. This clarifies that only saving money is just not reasonable if you want to send your child abroad for higher studies. However, experts say that with proper planning, parents can ensure their child’s educational dreams.

If you are also among those parents who are planning to send their child abroad for higher studies, here are a few things and strategies that you can follow and create a good financial wealth to support your child’s higher education abroad.

Estimation Of The Cost….

When you know how much funds you have to arrange for your child’s higher education abroad, it becomes easy for you to structure your investment planning to create that much wealth. So, the very first step is calculating or estimate the cost for higher education abroad.

Now point is, what kind of costs must be estimated? This is important to know because most of while estimating the cost only consider the course cost, however, there is more section that are must be included.

The right way to estimate the cost- calculate the entire course’s cost in current times, along with other expenses that include tuition fees living expenses, traveling costs, and miscellaneous fees.

After that take into consideration the time after which you will require this amount of money for your child’s higher education. And lastly, factor in the inflation and rupee depreciation, and calculate the total amount required. Estimating your expense in this way will help you not fall short of money later at the time of need.

Plan, How To Fund This Amount…

Well, there are various options to fund this amount but keep in mind, all options are not optimal! One among the most favored options are taking education loan, but here parent must understand that most lenders usually fund around 80-85 percent of a course’s cost. This implies that around 15 to 20 percent of the money needs to be paid by the parents/guardians. And after that, they have to arrange other costs like living costs, travel costs, and others.

Experts suggest, with proper and timely planning, parents could also solely fund this type of cost, by timely investments in mutual fund SIPs. This option is best because in this case, you would not have to pay back the loan amount to the bank, that too with interest.

The Early You Start; The More You Will Accumulate…

Till now you have calculated the total amount you will require for your child’s higher education abroad, and you know the time after which you will require the amount, then what are you waiting for, calculate your monthly SIP amount and start investing in mutual funds via SIP today only!

To accumulate a good amount of corpus, start investing at the earliest no matter what your child’s current age. Remember the more you delay the more it will become difficult to create that much big corpus, however the early you start and the longer you invest will help you accumulate more money.

For instance, if the total cost is Rs 1 crore to send your child’s education abroad, and currently your child is 3 years old, then you have an investment horizon of 15 years. So, investing in an equity mutual fund SIP of about Rs 21,000 monthly would get you your desired money, with expected returns of 12 percent. However, if you wait till he/she is 10 years of age, your SIP amount will be pushed to Rs 65,000.

Do Review Your Investment At Intervals….

Stating investment is an important step but it is not the end, reviewing your investments intervals is equally in fact more important. Investments should be reviewed at least once or twice a year.

How to review investments in mutual funds- While you review your investment try comparing the performance of the fund with its peers and benchmark indices. This way investors can spot the nonperforming or underperforming funds. And timely those funds can be replaced with better performing funds, to reach the desired goals.

Shift To Less Risky Asset Class…

Experts say not only proper investment planning but an investor must have an exit strategy also planned. Experts suggest as you are near reaching your goal, shift your investments in less risky assets, not all in one time but in a staggered manner. Once you are about to reach your desired corpus after investing for 12-15 years, try to move the corpus to a less risky fund, so that you don’t risk losing it.

You can consider shifting your accumulated wealth in a staggered manner in debt mutual funds, as they offer good liquidity and safety, and also interest rates up to 7.25 percent.

For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).