Amol Joshi, Founder, PlanRupee Investment Services, shares actionable insights
Moneycontrol PF team
In this episode of Managing Money with Moneycontrol, we tell you how you should start planning for your child’s education and the key rules you should keep in mind before investing towards it. In the accompanying video, Amol Joshi, Founder, PlanRupee Investment Services, shares actionable insights on how to get your child’s education goal fulfilled and how to follow the right asset allocation strategy for it.
Key rules of planning
- Identify goals in terms of the amount
- Identify goals in terms of years to get if fulfilled
- Do the reverse calculation to know what amount of monthly/annual contribution it will take you to reach that particular goal.
- Do proper asset allocation as much as possible from time to time
- Have fixed income asset in your portfolio that will give you steady investment experience and also have equity assets that will give you a growth kind of an experience in your investment.
These are the simple step which can help you fulfil your child related education planning goal on time.
How to set a target amount?
Expenses for graduation studies starts around the age of 18 and post-graduation expenses come around the age of 20-21. Therefore, a good investment strategy to start saving money for child’s education goal is to start investing just after the child is born. It will give you around 20 years’ time period to save your money. Also, your target amount to save for that goal will be much lesser because you get the benefit of compounding interest or compounding capital gains over the long period of 18-21 years.
But, before setting an amount, it is important to analyse the kind of educational institution which your child wants to go. However, it is difficult to estimate the cost but one should ideally take some examples from the current situation. For example, tuition fee of a good B-school situated at Hyderabad is around Rs 30 lakh. So, after 18 years at around 8% of inflation, one would probably need around Rs 1.2 Crore of an amount from today. So this is how you identify the amount. You adjust it with expected inflation over a period of time and then you should do the reverse calculation to meet the target amount after 18-21 years.
How to go about investing money?
Generally, parent plans to save their money through safest option, which at some point is not wrong. Say, you are investing through fixed deposits, you roughly get 6-7% return. However, investors should also go for an instrument like equity which can give them inflation-beating returns too. It has been observed that over the long period, equities have given around 15% return. So, if you take 2/3 of equity and 1/3 of debt in your portfolio, you can hope for returns of up to 11-12%. This can be very helpful in achieving your goal within a given period of time.
To know more, watch this video on child education planning and also get to know how will you be benefited from taking education loan.(You can send in your queries to firstname.lastname@example.org)