We love our children to the moon and a large part of our working life revolves around making their lives easy, happy and fulfilled. Needless to say that parents go out of their way to make lives of their children better and of course give them the best. We often aspire to give them the education and exposure to reach heights we have only imagined, sometimes in our dreams. While we aim to make their every dream come true, we need to ask ourselves if we are in a position to finance them.
As the cost of education (domestic or international) rises as your child grows, it becomes one of the biggest stumbling blocks to provide them the tools for a successful future. Many parents opt to invest in a children’s insurance plan and believe that they have enough coverage for the latter’s education. But children’s insurance plans can prove to be inefficient and at times inadequate to fund their education; whether in India or overseas. It’s important to look at education as a separate financial goal and plan for it accordingly. The right financial planning and starting to invest early can assist you in building a strong financial base to launch well-deserved educational opportunities for your children.
The first step towards planning for the education goal of your child is to ascertain the cost of education keeping in mind the present situation. You may need to answer the following questions to get more clarity on the cost, such as:
Which degree requires more funding, graduate or post-graduate?
What are the types of expenses that need to be covered, like accommodation, living expenses or travel costs?
Once the present value of the cost of education has been established, you need to ascertain the future value of the education fund requirement. Your financial planner can assist you in understanding what exactly is the applicable education inflation, which is usually higher than regular inflation. Another factor that is imperative to take into consideration, is the education inflation in the country where you want to send your child and take into account the rate of depreciation of the currency. This refers to the rate at, which the rupee will depreciate against that country’s currency.
Taking all this into account will help you determine where you need to invest today. Keeping in mind your risk appetite and time horizon, you along with your financial planner can construct a portfolio with investments that will earn the required returns.
There are alternative ways to fund your children’s overseas education like scholarships and education loans. Education loans can be availed abroad or in India itself. They usually cover tuition fees, living costs and other expenses related to education. You may choose to opt for an education loan if your education expenses are very high or your budgeted amount is not sufficient or you do not have enough time to accumulate the amount. It is always better to plan for an education goal so as to reduce the loan amount.
The details of the career path that your children may choose, might not be clear when you start investing. However, an early investment can ease things considerably. Thus, it is prudent to invest in a way that you accumulate more than you accounted for. You would rather be in a position where your children can avail pursuing an expensive education program versus you not being able to afford it.
As is true for most financial plans and investments, the early bird definitely does get the worm. Start planning for your children’s higher education as soon as you possibly can. Even though you may not be able to plan for every eventuality, you can assuredly create a scenario where your children can access opportunities and get the education that will empower their future.
The author is the Founder, My Financial Advisor and HappynessFactory.in