Every Parent wants the freedom to say, “Yes” to right school, the right course, and the right country; without money becoming the deciding factor. The reality though, is that the education costs in India and abroad are rising faster than the routine inflation.
That’s why Investing for your Child’s Education is not a someday task, it is a NOW task. The good news though is that with a simple, structured plan, and a few smart habits, you can stay ahead of the education inflation and the worry to fund your child’s dream confidently.
Here are 4 Essential and No-Nonsense Tips for you that are practical and achievable.
1) Don’t Wait for the Right Time
Perfect timing is a myth. What actually moves the needle for your portfolio is time in the market, and not timing the market. The earlier you begin, even with a modest amount, the better the compounding effect works for you.
Starting late will mean that you’ll need to invest a lot more each month to reach the same goal. Refer to the table below to understand. For an Education Corpus required for ₹20 Lakhs in Future (Inflation Adjusted), when the child reaches age 20, the table compares the amount required to accumulate the corpus of the same amount.
| Investment Begins At | Kid Age 5 | Kid Age 10 | Kid Age 15 | Kid Age 18 |
| SIP Required (in ₹) | ₹4,000 | ₹8,600 | ₹24,200 | ₹73,400 |
| Lump Sum Required (in ₹) | ₹3,65,393 | ₹6,43,946 | ₹11,34,854 | ₹15,94,388 |
Source: EduFund Internal Research. Returns assumed at 12% p.a.
Quick Habit Upgrades
- Automate your monthly savings into an SIP specifically for your child’s education.
- Step-Up Annually as your income grows to keep pace with inflation
- Consider parking bonus, gifts, or other gains to shorten the amount required.
2) Use a Goal Based Approach
Instead of putting away bulk of your money randomly, reverse engineer your way into your education goal.
Estimate the cost as of today. List the options:- Indian Universities or Overseas. Scholarships, Loans, and Investments or just Investments.
Once you have arrived at the current cost, factor in the inflation effect by calculating the number of years that remain for admission. If you are considering overseas education, also factor in the currency depreciation.
Once you have the target amount required at the time of your child’s college admission, you now need to map your existing investments as well as fresh investments to this goal. If the goal is more than 7 years away, consider having a healthy balance of equity in your portfolio to help you with growth. Track your investments regularly and rebalance if required.
You can also use EduFund’s College Cost Calculator on our website or app to do all this in few clicks.
3) Diversify across Asset Class and Markets
It is important to diversify as it helps you reduce your overall portfolio risk. Diversification is not nice to have, it is a guardrail that keeps your education goal on track through the ups and downs of the market. Have a blend of multiple asset classes in your portfolio to diversify.
Also, don’t keep the diversification limited by geography. Diversify in global markets like US to add some international flavour and tackle the currency depreciation risk.
Because, if there’s even a little chance that you are considering overseas education for your child, the expenses will be in currency other than the INR. And diversifying internationally will act as a natural hedge for you as your international investments benefit from currency depreciation.
4) Insure Yourselves
Even if you plan the best investment plan for your child’s education, it can fail if life throws a curveball and there is no safety net. Hence here are some of the non-negotiables for you:
– Get yourselves covered with Term Insurance so that even in your absence, your family’s living expenses as well as their important goals like child’s education remain safe.
– Get a Health Cover as medical bills should not be the reason for you to liquidate your investments.
– Keep at least 6 months of expenses in a liquid investment option.
Bringing it Together
Building the best investment plan for Child Education is not about chasing the hottest investment idea but it is about steady habits. Start Early, Prefer Goal Based Investing, Diversify Smartly, and Ensure Safety Cover. This simple but essential tips will help you create a structured plan for your child’s education. And then, the goal won’t feel like a moving target stressing your finances, but a planned and prepared milestone.
FAQs
1) What is the best way to fund my child’s education?
Goal based investment approach is the best way to fund your child’s education. Estimate the current costs, factor in the inflation and arrive at future cost, and then arrive at the required investment to achieve the goal. This will help you prepare a structured plan and remain on track with as your progress.
2) What is the best time to start investing for my child’s education?
The best time to start investing is now. The earlier you start, the better it will help you achieve your goals faster.
Disclaimer: The data in this presentation are meant for general reading purpose only and are not meant to serve as a professional guide/investment advice for the readers. This presentation has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been suggested or offered based upon the information provided herein, due care has been taken to endeavor that the facts are accurate and reasonable as on date. The information placed on the presentation is for informational purposes only and does not constitute as an offer to sell or buy a security. The Company reserves the right to make modifications and alterations to the content available on the presentation. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investment. The EduFund platform & the website is owned, operated and maintained by Helena Edtech Private Limited, a company incorporated under the laws of India. An affiliate of the Company, i.e. Edubillions Tech Private Limited is registered with AMFI as mutual fund distributor bearing the registration number ARN258733. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The valuation of securities may increase or decrease depending on the factors affecting the securities market.
About the author
Niraj Satnalika
Head Of Research,EduFund
Dr. Niraj is a finance professional with 12+ years of experience and is part of the founding team at EduFund. He’s worked with Goldman Sachs, CRISIL and Sakal Media in roles spanning investment management, research and leadership. With a PhD in Finance from IIT Bombay, he brings deep expertise in valuation, governance and education planning. When he’s not teaching or writing, you’ll find him cooking or going on long drives.
