Parenting is a responsibility, and there are no two ways about it. The education and experiences of your child are primary to the kind of person your child becomes. Their success, wisdom and understanding of the world are dependent on education. It begins with their schooling and continues to rely heavily on higher education and beyond. When something is this crucial to the well-being of your child, you ought to plan and plan early.
Education Planning Necessities
An education plan for your child has two essentials. One, the decision-making process that involves choosing the right school, college and university, and second, the financial aspect to fund the desired degrees. The decisions your child takes (with your consult) about studying at a particular university are driven by research and counselling – and they’re mostly left to the last couple of years before university.
The finances, however, require wise long term investments and insight. To realise this undertaking, we have to first calculate the many expenses of higher education and the eventual corpus you would need to fund your child’s dreams.
Calculate Costs Better With Helpful Tools
Calculating the cost of college education ten to fifteen years in the future might feel burdensome, so it is better to use tools like the education cost calculator on the EduFund app. The smart calculator accounts for education inflation – the increase in tuition and living expenses year on year.
Accounting For Education Inflation
Education inflation can be understood with a simple example. An MBA from a reputed institution in India like IIM Bangalore cost around 10 lacs in 2010, and now the same exact degree costs about 23 lacs in 2021. The education inflation in the last decade in India was more than double the general inflation. The education inflation across the world has been similar and is currently on the rise.
On the EduFund app, you just have to enter the details of your child, possible universities they’d want to go to and the year they’d begin university. The calculator will give you an accurate estimate of the amount you would need when your child is ready for college. This becomes your north star, your investment goal for your child’s dream education.
Investment Advice From The Wise
Once you have the goal calculated, the next step is to start an investment plan where you invest a certain amount every month (the EduFund calculator will give you this amount as well) into an investment vehicle that can give you good returns. If you’re new to investing, it would be wise to get in touch with a wealth advisor who can guide you.
If you have plans for your child to study in the top universities in the world, a wealth advisor would encourage you to diversify your portfolio by investing in the US markets.
The Advantage Of Investing In US Markets
Ever since Indian independence, the Rupee has gradually depreciated compared to the US dollar. This is the reason why exchange rates remain a nightmare even when we’re thinking of a small vacation to the US or Europe. Now imagine studying there for a few years and those expenses, and the burden that exchange rates could then be.
The solution? Invest in the US markets and save in dollars in order to spend in dollars.
The US markets are mature, with some of their large-cap companies holding a valuation of over a trillion dollars. Additionally, the US indices like the S&P 500 have delivered consistently good returns for over six decades.
1. Geographical Diversification
If there is one investment lesson that most of us are familiar with, it has to be of not putting all your eggs in one basket. This lesson doesn’t just end with investing in multiple companies in diverse fields but also includes investing in geographically diverse markets.
Often, the Indian market experiences ups and downs based on regional factors that include politics, regime changes, natural disasters, and more. A portfolio that isn’t geographically diversified would be heavily affected by these.
To counter this, investing in the US markets is an obvious solution as the market sentiments that affect the Indian markets rarely have an effect on the US markets.
2. More Than One Way To Earn Returns
When you start investing for your child’s education in the US markets, you’re gaining in two ways – first by the dividends and capital appreciation, and second, with the depreciation trend of the rupee. You have strong possibilities of getting more rupees for every dollar in the long term.
With so many obvious advantages to look forward to, the only hardships stopping Indian parents from investing in the US were the lack of accessibility and the long paperwork. Thankfully now, platforms like EduFund make this process simple and convenient. No paperwork. No long waiting periods. No confusion.
Someone wise once said that an investment in education pays the best dividends. We understand that every parent wants their child to have more opportunities than they did, and have greater resources at their disposal than they did. With time by your side, some discipline and the power compounding, it is easily possible.