Where should I invest ₹50,000 per month for my child’s education?

Maitri Shah, Founder, Laxme, a CSR initiative of Prudent Group

We can use the following components for the education of the child:

1. Step up SIP and SIP in Mutual Funds.

> Pursuing SIP helps investors to increase their investment amount gradually, thereby accelerating wealth creation and achieving financial goals in a planned manner.

> Increasing SIP helps in averaging the cost of investment, reducing the impact of market volatility and generating higher returns over the long term.

> By increasing the investment amount gradually, investors can stay invested for the long term, avoid the temptation to time the market, and benefit from the growth potential of the stock market.

Some of the disadvantages of doing SIP are high cost, market risk, limited flexibility and no guarantee of returns.

2. Sukanya Samriddhi Yojana Sukanya Samriddhi Yojana is a government-backed savings scheme launched as part of the “Beti Bachao, Beti Padhao” campaign. It aims to promote the welfare of the girl child and encourage parents to save for their daughter’s future education and marriage expenses.

Benefit:

> SSY offers a high interest rate, which currently stands at 8% per annum (till April 2023), making it an attractive investment option for parents who want to generate safe and stable returns on their investment .

> Investments made in SSY are eligible for tax deduction under section 80C of the Income Tax Act, 1961 up to the maximum limit. 1.5 lakh per annum. Additionally, the interest earned and maturity amount are tax-free, making SSY a tax-efficient investment option.

> Parents can make flexible contribution to SSY with minimum investment 250 per year and max. 1.5 lakh per annum.

While there are many advantages of Sukanya Samriddhi Yojana, parents should also consider its disadvantages before taking any investment decision. Long lock-in period of the scheme, limited coverage, limited investment amount, inflation risk, and no liquidity option may affect the flexibility and return potential.

Aniruddha Bose, Chief Business Officer, Finage

Mutual funds offer a variety of products and solutions that can enable you to create an adequate corpus for your child’s education. You can run a long term SIP investment of Rs. 50,000 in aggressive mutual funds (such as small cap, mid cap or multi cap funds) during the initial years of your plan, and de-risk the corpus systematically using a Systematic Transfer Plan a year or two before the target date.

Compared to mutual funds, traditional “child education plans” offered as packaged solutions by life insurance providers have low returns, are opaque, and usually don’t even beat inflation. A qualified consultant can help you with a better solution. Fund for your child’s education, after prioritizing your various financial goals.

Nirav Karkera, Head of Research, Fisdom

In order to plan for the expenses of the child’s education, it is important to determine the required target amount and when such funds will be required. Since education inflation is expected to remain high for an extended period, it is recommended to start investing for this goal as early as possible. Investing at least seven to ten years in advance allows for an aggressive allocation towards equities.

For an investment horizon of more than ten years, an equity portfolio with a focus on high quality midcaps should efficiently achieve investment goals. As the investment approaches the goal, with three years or less remaining, the portfolio should be de-risked by gradually shifting toward less volatile fixed-income options.

Investors with higher risk appetite can explore pure market cap categories like largecap and midcap funds to build a portfolio. For those who prefer not to decide on market cap strategies, flexicap and multicap funds offer a strong promise. For investors with a medium-term horizon of five to seven years, dynamic asset allocation funds and multi-asset funds can provide attractive risk-adjusted returns over the term.

CA Manas Chugh, Investment & Taxation Expert, Osgan Consultants

There are various specially designed mutual funds for saving for education that an investor can consider. The options depend on the risk appetite of the individual. Equity mutual funds are considered the best option for long-term growth as they have the potential to offer a better rate of return. If a person wants balanced risk, an investor can buy balanced mutual funds or fixed income securities.

For the girl child, Sukanya Samriddhi Yojana (SSY) is the most preferred option as it is government-backed and offers an interest rate of 8% but with a lock-in period of 21 years.

Mr. Manu Rishi Gupta, Founder, MRG Capital, a SEBI Registered Portfolio Management Company

Planning for a child’s education requires some discipline as it is an unavoidable expenditure which is predictable to some extent and with a definite time frame of investment. A corporate bond investment in a well rated company, which earns additional returns over a fixed bank deposit, can be considered. The timing of maturity of a corporate bond can be closely matched with the need for funds for a child’s education.

It becomes difficult to make a monthly SIP of Rs 50,000 as the same bond may not be available every month and may not offer the same yield. Therefore, it is ideal to start with a mix of equity and debt (or SIP in hybrid mutual funds) for a few years and then invest lump sum in corporate bonds to achieve the goal. The tenure of investment in Hybrid Fund can be increased/decreased as per the expected returns and availability of corporate bonds which provide the required redemption amount.

Dr. Babli Dhiman, Professor – Finance Mittal School of Business Lovely Professional University

The investment in the child’s education depends on the domain area and the fees of the institute. If the estimated cost of education will be more than 1 crore, then Rs 50,000 can be invested in Tata AIA child education plan like Fortune Pro-WOP, Capital Guarantee Solution etc. Whereas, if the cost of education is less than 1 crore then child education plans from Max Life, SBI and Bajaj Allianz, HDFC etc can meet the financial needs of your child’s education.

All education plans are available in multiples of Rs 10,000 as investment and offer returns of 8%-21% with lump sum payouts. The lock-in period for investment is a minimum of 10 years. You can start child education plan from nursery class to earn sufficient amount till your child completes 10th standard. It is also very important to add the rising inflationary trend while choosing an investment plan for your child.

Prateek Vaidya, MD & CVO, Karma Global, a tech-enabled HR and compliance organization

This type of planning needs to be done with love and thoughtful thought on both the investment approach and strategy as your child’s future is at stake.

It cannot happen that one fine morning you wake up and decide to secure your child’s future and higher education and indulge in it with some ad hoc planning.

In fact, I know of many parents who have growing children, and decide to build a nest egg for their future education, but are in a dilemma as to how they should invest and which investment avenue to use. should do. I have learned that some hopeless cases fail because of ignorance or bad advice. There are more than 25 education plans in the market today that speak loudly that what they offer is the best.

My advice is to always keep two factors in mind, one is to identify and estimate different time horizons keeping inflation in mind. For example, a two-year MBA course that may cost Rs 20.00 lakhs today may cost Rs 50.00 lakhs after 10 years.

It is always good to start building a portfolio with an appropriate asset allocation (AAA), which is capable of ensuring growth and safety of investments within a range of age and goal horizons.

I would strongly recommend that you put eggs in 3 different baskets instead of one basket, may be sometimes one big basket works great and gives you good returns but if the basket stops moving outwards, Then you will have to face disappointment. However, of the 3 different baskets, the other two will always rise if one fails.

The 3 investment products I would recommend in various combinations are:

(1) Public Provident Fund (PPF)

(2) Equity Mutual Funds and

(3) Sukanya Samriddhi Yojana (SSY) is proposed by the Government of India and is eligible for tax exemption.

However, if you are a conservative investor, your best bet would be (1) Equity Fund (2) Voluntary Provident Fund (3) Public Provident Fund (4) Employees Provident Fund. Again in Equity Funds, it is advised to choose from 2 Large Cap Index Fund, 1 Flexi Cap Fund and 1 Large & Mid Cap Fund.

Another safe option would be to invest in mutual funds, fixed deposits and public provident funds.

But please keep this underlying principle in mind, always re-evaluate your risk profile for risk taking ability and if ever needed, consult a financial planner if you feel your investments are going off track , so that remedial steps can be taken at the right time. Time.

It is true that only small savings may not be enough but you need to take big steps to fulfill your child’s aspirations keeping in mind the market dynamics with multiple investment approach.

Praneet Arora, Co-founder and CEO of Univest

Investing in your child’s education is not only a smart financial move but also a necessity and there are many investment options to grow your savings over time. One option is equity mutual funds, which have historically given higher returns than other asset classes over the long term. Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme designed to meet the expenses of girl child’s education and marriage.

Education savings plans are special schemes offered by some mutual fund houses and insurance companies to meet the expenses of education. It is advisable to consult a qualified financial advisor to understand your financial goals, risk tolerance and investment horizon and to choose investment options that suit your specific needs. It is also important to regularly review and rebalance your investment portfolio to ensure that it remains in line with your child’s education goals and overall financial plan.

Mrs. Meenakshi Sharma, Assistant Director – PR, KL Deemed University

Education is important for the overall development of children in India, as it is essential for their physical, mental, emotional and social development. Education encourages children to become self-reliant, take responsibility and become members of society. As a result, it is important for any parent to choose where and how to invest money in their child’s education and development.

Apart from academics, parents should encourage their children to improve their skills in other areas as well. There are many affordable courses available in institutes for co-curricular activities where parents can invest 50,000 monthly and these activities can be sports education, music, foreign language, programming, swimming etc.