Indian Rupee (INR) has a long history of falling against the dollar. INR-USD equation has hit a new low of Rs 80 to a dollar. What it means is that for buying dollars now you have to cough up more Indian Rupees than before. Back in 2017, you required Rs 64 to buy a dollar, now you need Rs 80, an almost 5% annualized fall!
A weaker INR impacts all the expenses that you incur in dollars. And, this includes the education costs of sending your children abroad. If you have already sent your kids abroad or are about to send them for a 3-5 years course, it’s better to plan your foreign exchange needs in advance.
Currency risk is a significant concern when funding education abroad. The ability to pay for higher education is made easier if you use dollars. When you send your children overseas, there are other charges in addition to the course tuition. You need money to pay for everything from lodging to food bills over the course’s whole duration. And what better way to pay for that than with the income received from US stocks?
Traditionally, INR has weakened against the dollar, and therefore, arranging dollar-denominated funds in advance will help you fund your kid’s foreign education. Owning assets with a dollar value is one of the many strategies to mitigate or counteract the effects of a stronger currency.
The cost of education in the US is high, but not out of bounds, especially if you have done your homework and made a plan. India accounts for over 20% of all international students studying in the United States. Anything over $50,000 a year, or Rs 40 lakh a year, adding up to Rs 1.6 crore over the course of a 4-year engineering course in the US, will cost you money.
By making long-term investments in US equities and ETFs, investors can not only diversify their Indian portfolios but also negate the rupee’s fall against the dollar. Sending dollars for foreign education will get expensive unless you have INR saved in a foreign account. To protect against declining INR, students undergoing international courses may keep money in foreign bank accounts, US ETFs, or top US stocks.