How to Save and Invest for Your Childs International Education
Determine the amount of money required for abroad education and begin saving for it on a regular basis.
Most Indian families prioritize providing their children with the greatest education possible. It is in high demand to study at the best universities and institutions abroad. Making entrance to Ivy League institutions is difficult given the competition and the high prices involved. In such a case, parents must plan to establish an education corpus for their child's abroad schooling. This is how you do it:
Saving and Investing for Your Child's International Education
Determine the cost of international education and begin saving for it on a regular basis.
Most Indian families place a high value on providing their children with the best education available. Other countries' top universities and institutions are in high demand. Admission to Ivy League colleges is challenging considering the competitiveness and high costs involved. In this instance, parents must plan to create an education corpus for their child’s abroad education at educationally enriched destinations. Here's how you do it:
Check the prices charged by the leading institutions for some of the courses available today. The cost of Canadian education, on the other hand, comprises both the fees charged by universities for academic inputs as well as the cost of living. The costs are amortized over the course of the study and are subject to inflation. According to experts, while evaluating the cost, one must account for approximately 4% inflation and approximately 3% currency depreciation. The former is an estimate of the increase in course fees and living expenses, while the latter is the rate at which the rupee has historically lost value against the US dollar.
The numbers for your child's education corpus will vary depending on the country, college, and course of study. "Inflation is a silent assassin." "It is better to plan ahead of time because educational inflation can drastically increase the cost over time," explains Eela Dubey, Co-founder of EduFund.
If you get the estimate right and have enough time, you'll be off to a good start. The more time you have, the less money you have to invest each month.
If you have 15 years to save the aforementioned Rs 43 lakhs and expect a 15% rate of return on your investments, you must invest Rs 6,352 every month.
Your good chances are to invest in equities.
The figures look to be steep. But don't give up hope. You might begin saving gradually and progressively raise your investment to make up for a shortfall. Scholarships, tuition fee exemptions, and school loans are also available in some situations, which may be beneficial.
"Systematic investment plans (SIPS) in well-managed diversified equities mutual funds are the greatest method to save regularly and produce long-term returns that comfortably outperform inflation," says Gajendra Kothari, Managing Director, and CEO of Etica Wealth Management. Investing in dollar-denominated assets such as diversified index funds following foreign indices such as the Nasdaq 100 and S&P 500 is one of the greatest methods to manage currency risk, he adds.
Despite the current volatility in equity markets around the world, the long-term numbers appear promising. The Nifty 50 and Nasdaq 100 indices have returned 14.46 percent and 20.93 percent, respectively, over the last 15 years ending May 31, 2022.
Avoid chasing themes and sectors that have performed well in the past when investing in equities. Do not avoid equities because stock markets have become volatile. It makes sense to stick to the plan rather than trying to time the market.
"Investing in overseas stocks is not required if your allocation to domestic equity is beneficial." "You can keep some of your debt allocations in gold since gold is a strong hedge against an increasing US currency," says Feroze Azeez, Deputy CEO of Anand Rathi Wealth.
Maintain your attention on the goal.
While exposure to stocks, both domestic and foreign, provides the chance for significant gains, it also comes with volatility. It implies that you must keep track of the portfolio. As you get closer to your objective, you'll have to shift more money to debt assets, which earn less than equities but are less volatile. The best debt investment alternative is well-managed debt mutual funds, according to Kothari.
For debt allocation, conservative investors may want to consider fixed deposits (FDs). For the girl child, an existing Sukanya Samriddhi account can be used for debt investments aimed at education funding, as long as you are willing to accept the liquidity limits that come with it.
You must keep an eye on the expense of schooling and how it changes over time. Your assumptions on inflation and currency depreciation must be evaluated on a regular basis. If there is a gap, it is preferable to increase your investments.
While all of these investments and periodic evaluations should help you achieve your objective of a college fund for your child, do not overlook life's unpredictability. Buy adequate term life insurance early in life. It makes certain that your child's educational objectives are satisfied even when you are not present.
While education loans are available, investing in your child's education is a wise decision. It permits you to avoid touching retirement funds that cannot be funded in any other way.
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