There are always a repercussion attached with your finances; as your child grows, you dream for them to have a superior education. But this is always heavy on your pocket be it in India or abroad. Pinching your pocket/expenses alone will not suffice to execute your plans. You need to be a smarty pant and plan today accordingly, keeping your goals in mind.
Your savings
fund can be categorized into discretionary and essential. Discretionary funds centers
around your personal goals like car, house etc. Essential funds on the other
hand, gravitates towards your emergency funds like medical bills, retirement
savings and even your child's higher education. All in all, you can always
put off your discretionary fund without it effecting your family financially. But
same cannot be said for your essential funds. Your kids’ education funds that
are part of your essential fund are unavoidable and cannot be overlooked. So,
the point here is that there is a need for a separate savings fund, if you’re
deciding to further educate your child.
The first
step you need to follow is to decide upon an amount that you will need to set
aside. You are required to take all the aspects into
consideration and chart out an approximate value that you’ll be ultimately saving
for. So, how will be begin? When you plan on a higher education, you might be
considering the best institutes in India or abroad. Don’t forget to include the
living expenses and adjustments for inflation apart from tuition fee. To help you out education cost calculators are also available, which take
into account different parameters like the city of study, the country and more.
When you have a rough amount you can proceed with your regular savings,
eventually you’ll reach the calculated amount without any hiccups, if you have
start early.
Education inflation
is an important variable that needs to be taken into account. This is the
increase in the education fee over time and surprisingly it is notably more
than the household inflation itself in many countries. Therefore, it is smart to
aim for a number that is slightly higher than the inflation-adjusted cost.
Similarly,
exchange rate is also a vital variable that’s overlooked, which comes to bite
you back when you send your child to a foreign university. The value of our
currency has seen a plunge over the past few decade and if the trend is taken
into account then, it is wise that you save and invest in USD. This is beneficial
in two ways, first, it will protect you from the falling value of rupee and
second, you’re exchange rate worries will diminish.
You could
save for your child’s higher education through mutual funds, although they run
some risk compared to fixed deposits, which is another good option. Mutual
funds are capable of significant returns that are able to keep up with the
education inflation, thus paving a way to reach your goals. But do keep in mind, before jumping into any investment
you need to thoroughly investigate, check for credibility and read all the small
fonts, before moving forward with it.
After all this, what to do if you are still short when the D day arrives? You can look into affordable loans, which would not sting you to an extreme extent as you’ve done most of the ground work by saving and investing wisely. For all the young parents out there, you have the added advantage of time on your side and with the magic of compounding, some financial regulations you’ll achieve your goals in no time.
Don’t let your child’s dream take a back seat because of your finances, save and invest wisely so you can offer and afford their education with minimalistic loan burdens.
