Follow these simple steps to be tension-free about funding your child's higher education

The best way to avoid the pressure of managing money or fees of universities, is to start investing early. 

Follow these simple steps to be tension-free about funding your child's higher education
You get more burdened if you are planning to send child abroad for higher studies. Photo: Pixabay
By Hitisha Jain
Updated: Mon, Nov 14, 2016
04:44 pm
Mumbai, ZeeBiz WebDesk

It is every parent's dream to provide best education to their child. Here's when you start researching about the best plans, schemes, policies for investment. You try to reach out for the most suitable investment plan (generally long term) so that you can save enough for the studies.

You get more burdened if you are planning to send child abroad for higher studies. According to Geojit BNP Paribas report, it is estimated that in India, inflation in the primary and secondary education sector is around 12% and in the higher education sector, it is around 16-20% which again differs based on the institution and the course offered.

The best way to avoid the pressure of managing money or fees of universities, is to start investing early. 

Commenting on choice of investment, Suresh Sadagopan, Founder, Ladder7 Financial Advisor, said, "Assuming that one has time on their hands, monthly investments in equity assets is a good choice to quickly grow the corpus. This can be topped up from time to time using bonus, exgratia, incentives that one may get, from time to time".

"Some portion can also be invested in debt oriented investments. PPF could be a good choice if one has time on ones side.  If one is investing for goals abroad one could also consider investing a portion in investments in other currencies such as US Dollars. One could also invest in mutual fund schemes investing in companies or MF feeder schemes investing in funds abroad", Sadagopan added.

Moreover, another option of investment is Systematic Investment Plan (SIP) in mutual funds. Renjith RG, Associate Director, Geojit BNP Paribas, in his report said that equities have a proven track record of delivering returns beyond 14-15% over a longer period. However, according to a data, in India, over a 15-year investment period, the average returns delivered across 80 mutual fund schemes is around 18%.

For instance, if you want to build a corpus of Rs 30,00,000 in 16 years, one needs to invest Rs 4,160 per month in an investment that grows at 15%. If the same is delayed by 2.5 year, the monthly investment requirement goes up by 50%.

"Parents can chart a well-planned investment plan, well in advance for their children’s education by calculating the present average cost of education, the expected future cost (at certain inflation rate) and start investing towards that", Renjith said.

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