How to Fuel Your Child’s Aspirations to Study Abroad

Want to help your child stand a chance to study in a prestigious college abroad? Here’s how you can financially plan to achieve this dream!

If you see great academic potential in your child, geography should not be a boundary to bottle his or her blooming. Thanks to globalisation and technology, every part of the world is more accessible than it was ever before. However, with the world becoming an open market of opportunities, the competition as well as the costs involved in securing admission across the world have steadily increased.  With this being the situation, every aspiring parent must have a solid financial plan in place to successfully build a fund that will fuel their child’s future education.

The access to better-quality education is something that the future generation must leverage, as it opens up a level playing field for people from all parts of the globe to empower themselves with knowledge and top-quality education. India has great institutions such as the IITs and IIMs, which offer superior educational and career-building courses. The challenge, however, is that, out of the huge population of aspiring students in India, only 2% can get into these prestigious institutes. This is why globalisation is a good thing for education; students have more options to choose from, and great ones at that.

If you’re keen on watching your son or daughter bloom like a bud out of Oxford or Harvard, here’s what you can do to help translate this dream into a reality.

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The costs involved

It’s important to first comprehend the various costs involved in this endeavour at the very onset. Studying abroad is expensive, and that’s a fact. The annual tuition fees in major Ivy League colleges are almost Rs. 35 lakh – that’s roughly your child’s total schooling cost over the years put together!

That apart, cost of living and conveyance add on to the heap of costs involved. If you wish to enjoy the same quality of life you have now in major cities like New York, get ready to shell out close to 6 lakh (easily) – sad but true!

However, don’t be disheartened by these factors; as long as you and your child have the conviction to live the dream, nothing can stop you. All it takes is dedication from both of you – while the child concentrates on scholarships and academic excellence, it is the parents’ job to secure the funds needed to realise this collective dream.

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How to invest for your child’s education

Start early. Experts recommend that parents start saving for their kid’s education from the day the latter is born. As an early bird, you can start off with small portions and then scale it up as per your financial climate. This way, you won’t be burdened by this investment, and you’ll have enough time to collate a handsome fund to help your child spread his or her wings when the time is right.

Starting early will also give you enough exposure to the market, making you a more seasoned investor overtime. Once you have a feel of the market, you can chart out ways to optimise your earnings on investments and accelerate the gathering of your funds.

Choose the right investment option

If you’re looking at 10 years of investment, SIPs in equity funds should be ideal for you. If possible, you can also build a small fund in a Fixed Deposit account – it may act as a good cushion for your child in the future.

Mix it up

Investment experts recommend that parents go in for a balanced fund. These funds are a mix of stocks and bonds, and usually place 60% of assets in stocks while maintaining the same tax treatment as equity funds.

If you have a good risk appetite, you can opt for 100% equity exposure for the last five years of your investment. For starters, you can kick-off your SIP towards a combination of multi-cap and mid-cap schemes. While this is a good idea, it’s always recommended that you review their performances every six months. On average, equity funds rank an average annualised return of 15% in the past decade.

Not a fan of big risk? That’s alright. You can still direct about 70% of your investments into equity, provided you have a long investment horizon. The good thing about equity investments is that they help overcomes volatilities risk as well as inflation, thus working as a safety net.

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What about low-risk investors?

If you’re more comfortable operating sans risk, you’ll need to plan your savings and investments way earlier. Opting for the maximum permissible amount in your PFF is one way to go – but do it at least 15 years before your target. If you have a daughter who is yet to turn 10, you could open a Sukanya Samridhi Yojana account. With returns of 8.1%, this options ranks higher than PPF too.

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The last few years of investment

When you’re within five or six years of your target year, it makes sense to move about 50% of your funds to debt. When you’re just a year way, shift all your funds to debt. Why experts recommend this is because equity is volatile in nature, so you should be cautious enough to not allow a market downturn hurt your child’ education fund, especially when you’ve come so far!

A little focus goes a long way

Believe it or not, some industry experts actually vouch for ‘Child Plan’ offered by Mutual Fund houses, as they believe that the word ‘child’ helps parents focus better on the investment and keeps any temporary urges of interim liquidation at bay.

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