FDs, MFs, top choices for parents saving for child's overseas education plans

The US remains the top choice with 33 percent, followed by Canada at 14 percent, UAE at 12 percent, UK at 11 percent, and Australia at 8 percent.

Fixed deposits (FDs) remain the tops the investment choice for parents saving up for their children's overseas education. Around  63 percent of parents prefer it as an investment option, according to data gathered from 5,800 users of education consultant Invest4Edu, and shared with Moneycontrol.

Data shows that more than 90 percent of Indian parents are saving for their child’s education in some way. It could be FDs, mutual funds (MFs), or dedicated accounts set up for educational needs. About 73 percent of users have created education goals which show the awareness and the will to invest in the child’s education through various investment options.

While 44 percent of parents chose MFs as a saving method, less than 10 percent have not invested anywhere.

“FD’s are traditionally considered one of the safest investments and parents prefer to invest in it as a secure option. It is a zero-risk way to save as they are not market-related. Also, one can take the money out quickly if needed. MFs, on the other hand, are market-related but they offer higher returns. So, parents who invest in their child's education with a longer time horizon prefer MFs,” Rozy Efzal, Co-Founder and Director of Invest4Edu, told Moneycontrol.

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To be sure, FDs and MF investments are not exclusive. Child protection plans, which come under the insurance category, are another popular means through which parents secure their child’s education funding.

The average goal for saving is in the range of Rs 30 lakh within the average period of seven years. This shows the commitment parents have in their child’s education because the latest Association of Mutual Funds of India (AMFI) data suggests that of the total mutual fund assets held by individual investors in equity-oriented schemes, on average, 48 percent is redeemed within two years.

According to Efzal, parents are willing to trust their children more when it comes to selecting study-abroad destinations.

The US remains the top choice with 33 percent, followed by Canada at 14 percent, UAE at 12 percent, UK at 11 percent, and Australia at 8 percent. The rest is majorly divided between Europe, the Middle East, and China.

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Moneycontrol had earlier reported how education consultants and fintech platforms are consistently observing an uptick among women candidates availing of loans for overseas education.

GradRight noted an 18 percent year-on-year (YoY) growth in the last three years (2021-2023) among women applying for loans. Women are getting slightly higher approvals (5 percent), compared to male applicants, GradRight data shows.

At HDFC Credila, the number of female borrowers, as a proportion of total borrowers, stands at one-third of all loans disbursed, as of FY24. Over the past few years, while the bank has seen this proportion to be constant, the number of girl students availing of loans to pursue education at institutions, both in India and overseas, has grown by almost 50 percent since last year. Similarly, at Invest4Edu, women now comprise about 45 percent of total applicants. Compared to FY 2021-22, that is a jump of nearly 50 percent.

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