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Overseas education is an expensive proposition and while planning, parents need to consider various factors such as college fees, along with living expenses, travel expenses, etc. for the overall budget.
Many parents find it difficult, even after their lifelong savings, to send their child abroad for studies. It is so because savings are usually not sufficient. Over the years, education costs have increased to a great extent. Not only for higher education in a foreign country but also for secondary and higher education within the country. Having said that, experts say with proper financial planning, parents can ensure their child’s educational dreams, be it within the country or abroad.
How should you plan financially for your child’s studies abroad?
Suraj Shroff, Founder of Infiniti Investments says, “Ideally to build the required corpus, parents should start building the corpus when the child is young. Earlier the better to experience the power of compounding. As the child grows, you will also see the portfolio grow over the years.”
Hence, when it’s about child education’s financial planning – time duration is the trump. V Vijayakumar, MD and CEO, Zebu says, “If you plan in well advance you either you can choose a lump sum or SIP savings route. If you start early your saving you have a leverage of risk-taking it may yield you a higher return. Else you will end up with risk-averse options for savings.”
It is said that the main contributors for a successful corpus would be to start early, to keep increasing the savings contributions regularly and having the right choice of investments appropriate for a children’s education goals.
What should be the appropriate investment strategy?
Since this an important long term goal for the parents, usually experts suggest that the portfolio is a good mix of growth assets.
Shroff says, “Diversified equity mutual funds are an ideal allocation for this goal via the SIP route. Additionally, since the education expense, if going to be denominated in Dollars, a reasonable allocation of 25-30 per cent into International Equity via the fund route will be ideal.” He further adds, “Cryptocurrencies like Bitcoin and Etherum look very tempting, but given the regulatory overhang and the highly volatile nature, it is better to skip these investments for now.”
Experts say the required corpus can be accumulated over a period of time with a simple growth strategy with periodic modifications if required.
Vijayakumar adds, “When you start your education along with starting to plan early, you can go for blue-chip funds or 100 per cent equity plans. Rather, if you start your education savings plan with lesser duration then you have limited option of a balanced fund or liquid funds.”
Role of an education loan along with investments
Industry experts say, with the current currency exchange rates, savings alone do not cut out to be the best option for funding a child’s international education.
Amit Gainda, Chief Executive Officer, Avanse Financial Services, says “The rising inflation and costs coupled with the collective aspirations are increasing the education budgets that are not always met with many years’ savings. Further, unplanned situations and emergencies also impact years of savings. Hence, an education loan is usually an ideal choice for financing a child’s education.”
He further adds, “Wealth appreciation is more when invested in different capital generating schemes that may suit each investor’s goals and breaking savings may expose people to several risks. These challenges can be easily navigated through an education loan.”
With technology interventions, one can now get an education loan with just a few clicks in a few days’ time. Additionally, customized student-centric offerings by various lenders also play a key role in supporting parents to make the right financial decisions.
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