Every parent aspires to offer the best education to their children. Now that studying abroad has become more accessible, it is very common for parents to send their children overseas for higher education. But the catch is that this requires a huge amount of funds to realise this dream. If you are also someone who is aspiring to send their child abroad for higher education then this article will surely help you in how to start saving and planning ahead to provide a life-changing experience to your child.
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One of the key tips to start saving for your child’s higher education is to start early, keeping in mind the factor of inflation. Saving alone won’t make a huge difference in your financial planning if you are not investing the money wisely. When people talk about investing wisely it mainly involves two key areas. We talk about the same below.
First is- to not invest your money entirely into fixed deposits or any other debt instrument as that won’t match the pace of inflation. This will not help you to save much as the interest rate of FDs and other alike instruments are quite less as compared to inflation.
The second area is that you should not invest entirely in equity, either, as the market is quite unpredictable and in times of recession, it can affect the entire corpus greatly. Having said this, you also need to focus on inflation categorically in the education sector as the universities’ fees keep increasing year after year and never stay the same.
Start Early and Calculate the Amount Considering Inflation
So, if you are planning to start saving for your child’s higher education abroad the best way is to start early. The first step should be to estimate the cost which should be calculated taking into account inflation. Also, we would like to suggest taking either the US or the UK as your base for calculating the estimated funds required. The reason behind this is the fact that they have the most expensive universities and also their cost of living is high. Making your calculations based on these two countries is like preparing very well in advance. This corresponds with the saying “shoot for the moon, and if you miss you will still be among the stars”.
Calculate with Us!
Going by this method, we are choosing the UK as an example for the basis of our calculation. So considering your kid is 5 years old and they will be 18 yrs when joining the university, the inflation will be for 13 years. The living expenses in addition to the course and college fees in the UK are estimated to be around GBP 37,800 (INR 38 lakh) (per year). Considering the inflation rate, GBP 37,800 (INR 38 lakh) will be equal to GBP 66,412 (INR 66.5 lakh) (approximately) after 13 years and till the kid reaches the age of 18 you will be needing this much amount of money till they graduate at the age of 21.
GBP 66,412 = INR 66,83,716 and since undergraduate is a 3 years program in the UK therefore for 3 years you would be needing a total amount of Rs. 2,00,51,148 for your child’s education in the UK.
Now that you have calculated the entire amount you would be needing for your child’s education abroad, the next step is to set up an investment plan.
For 13 years you would need to save around Rs.15,42,396 annually so that you meet your target on time.
Invest in Equity
When it comes to investing, equity is the best bet as you get to leverage the power of compounding. Also, keep on rebalancing your investment in equity and debt instruments to protect your funds from fluctuations and dips. Go for SIPs (Systematic Investment plans) as it is diverse and well-managed equity mutual funds that outpace inflation efficiently. Also to avoid currency fluctuation risk go for diverse funds which are dollar dominated and are managed by credible indices such as Nasdaq100 and S&P 500.
Do not Blindly Follow Internet Advice
Nowadays many people pose to be financial gurus and give advice that can derail you from your financial goals instead of helping you. Therefore refrain from following advice that is freely available on social networking sites such as Whatsapp, Facebook, Telegram, YouTube, etc. Also, avoid speculative investments or instead assign them a low percentage in your portfolio. So that in case of any drastic change, your funds don’t get impacted much.
If you feel stuck somewhere, Leverage Edu is always here to realize the dream of a student to study abroad and ensure the best of opportunities for themselves. For more details all finance, you can reach out to Fly Finance, by Leverage Edu. If you have any other queries please feel free to call us at 1800-572-000.