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Education costs on the rise: Where should you invest for securing your child’s future?
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
With the rupee depreciating at a rate of 4-5% annually against major currencies, the outflow for education expenses can increase substantially over time.
Education costs have been skyrocketing in recent years. While general inflation hovers around 5-5.5%, the cost of education has reached around 11-12%. It is said that education expenses could potentially double every 6-7 years, putting a significant financial burden on families.
Moreover, for those considering studying abroad, it’s essential to factor in the impact of currency depreciation, which can further amplify the costs.
With the rupee depreciating at a rate of 4-5% annually against major currencies, the outflow for education expenses can increase substantially over time.
Given these daunting statistics, planning for your children’s education has become more critical than ever. But how do you navigate this financial challenge?
One common strategy is through mutual funds, offering a structured and potentially lucrative investment avenue.
Suresh Sadagopan, Founder of Ladder7 Financial Advisories, emphasises the importance of starting early when it comes to education planning.
He suggests initiating the process as soon as the child is born, acknowledging the uncertainty surrounding their future career path.
By starting small and gradually increasing investments over time, parents can build a substantial education corpus.
While there are dedicated children’s education plans available, Sadagopan advises that they might not always be the most efficient option.
These plans are tailored for individuals who lack expertise in portfolio management and asset allocation.
However, for those seeking more flexibility and control over their investments, mutual funds offer a viable alternative.
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Mutual funds provide a diverse range of investment options, from largecap to midcap funds, catering to varying risk appetites and investment horizons.
Sadagopan recommends constructing a well-balanced portfolio comprising mutual funds and other securities to achieve the desired growth while ensuring stability.
In addition to mutual funds, Sadagopan suggests considering real estate as part of the investment strategy, particularly for those with a long-term investment horizon of 10 years or more.
However, he advises a caution here, noting the lack of a consistent track record compared to mutual funds.
Real estate returns can vary significantly based on location and market conditions, necessitating careful consideration before allocating funds.
Watch this video for more.
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