The Economic Times
English EditionEnglish Editionहिन्दीગુજરાતી
| E-Paper
Search
+

    How to invest for your child's education

    Synopsis

    Parents want that their children are provided with the best education. However, undergraduate and postgraduate fees are increasingly getting expensive.

    Getty Images
    By Arun Kumar

    Parents spend a lot of time hoping to provide the best of everything for their children. Mostly, they want to ensure that the children are provided with the best education. However, undergraduate and postgraduate fees are increasingly getting expensive.

    Even if you don’t have any kids yet, it is always better to start planning in advance to ensure that you are able to fund your child’s education.

    Now, there is also another school of thought that believes the children need to take ownership of their own education by opting for an educational loan which they would pay for themselves, make them more responsible.

    Regardless of which side you take, by planning to save and invest regularly, you will at least have the choice on whether to fund or not when it is time for them to go to college. More importantly you can sleep peacefully knowing your child’s future is taken care of.

    So, if we want to save and invest, what can we do to help fund our kid’s college education?

    If you have more than 10 years:
    Invest 80-100% in equity mutual funds and the remaining part in debt mutual funds, based on your risk tolerance. You can start an SIP in two to three diversified multi cap equity funds along with one short-term debt fund.

    If you have 6-10 years:
    Invest 50-80% in equity mutual funds and the rest debt mutual funds. Again, the allocation should be based on your risk tolerance. You can start an SIP in two to three diversified multi cap equity funds along with two short-term debt funds.

    If you have up to 5 years:

    Invest 80-100% in debt mutual funds (remaining in equity) based on your risk tolerance. You can start an SIP in two to three short-term debt funds along with one balanced advantage fund (equity allocation is auto adjusted in this category).

    As the date of college education nears, the equity allocation should be gradually reduced, based on the above framework.

    Whether you fund the entire education, or help the children plan on their own for their future, the earlier you start the more likely you will be able to handle the cost.

    (Arun Kumar is head of research at FundsIndia.com)
    (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

    Also Read

    The Economic Times