Every parent desires to provide the best education to their child; however, planning and execution are keys here. Certain factors that can impact saving for your child’s higher education need to be looked after, especially if they are associated with foreign education.
Here is how to invest and plan efficiently for this goal. Two factors are crucial here as stated below;
Decide on the investing goal and include education inflation in the planning stage:
Education nowadays has become an expensive affair. Anup Bansal, Chief Business Officer, Scripbox says, “In this scenario, planning for higher education for your child in a foreign nation requires a large corpus.”
For instance, if your child is currently 10 years old, and you want to send them for college education either for undergraduate, post-graduation or both, experts say, you need to start investing now.
According to Bansal, admission, hostel/rent, and daily expenses per year on a foreign land can easily cost you in the range of Rs 50 lakhs – 75 lakh crore based on the country, course, and university.
Hence, “once one decides on a goal, one should not miss out on adding education inflation to that, which can be 6-8 per cent. This will ensure that he/she doesn’t fall short on their investment amount at the time of the need,” he adds.
Make achievable goals and focus on efficient asset allocation
To make it easier for you to save a large corpus for your child’s foreign education, experts suggest dividing the large goal into achievable goals.
You can do so, Bansal explains, “by dividing the corpus amount into the yearly amounts one needs to save, followed by breaking it down into the monthly amounts.” You can also take help of a financial advisor to guide you.
Once that part is completed, you can decide on the asset allocation. Bansal points out, “As given in the above example if one’s goal attainment is 6-7 years far, he/she can weigh for a good rate of equity in their portfolio. One should include fixed income instruments such as debt funds, bonds, and fixed deposits, in addition to equity tools such as mutual funds and stocks to create a balanced portfolio and ensure diversification.”
As you approach closer to the goal, according to experts, shift your portfolio to debt to reduce volatility and market risk at the time of withdrawal.
“Persistent and meticulous planning and execution will help one help their child live the dreams,” concludes Bansal.