As an old generation NRI, you may have lived a large part of your life in India, and you would want to spend your post-retirement years in India. You may have moved to a foreign land for a better life, better opportunity or higher income, or other reasons. Whatever the reason was, you may have decided to return to your homeland post-retirement.
However, there is a strong chance that your child, who would have spent most of his life outside, would want to continue living there and complete his education.
By the time your child is ready for higher education, you may have retired and not have a regular income. Also, as your child wants an education overseas, you will need a large sum of money. If you believe that you will be in the same boat in the coming years, you have to start planning for it now. Planning a child’s overseas education close to your retirement will be a huge risk.
How much to save for a child's overseas education?
Calculating the amount for your child’s education 10 to 15 years from now can be a daunting task. You may end up making a random guess as you are unsure what field your child will pick then. As you approach the requirement and you begin to understand your child’s interests, you can plan more specifically. You could start off with a default course like Engineering that is not too low, nor too high. The idea is simple – the more you can save and invest for your child’s future, the more flexibility you give them to pick the field they desire.
Few things to know before getting started
Before we discuss the areas where you can invest as an NRI for your child’s overseas education, you need to do your homework. We can call it pre-planning.
- Get yourself insured – Life is full of uncertainties, and when we talk about long-term goals, we need to have a plan B. For financial goals such as a child’s education, you would want no compromise, even in the unfortunate event that you are not around. Hence, you should have an insurance plan to ensure your child will receive good education under all circumstances.
- Zero-debt – Ideally, you will have to ensure you don’t have any excessive debt when you fuel your child’s learning. You can consider taking an educational loan for tax saving purposes and if you would like your child to inculcate a savings habit when they start earning.
- Define your Goals – You need to define goals that should clearly state how you will accumulate the required amount for your child’s overseas education.
- Develop an investment plan– Look for a good mix of debt and equity instruments. Study instruments that suit the education need. As you approach the requirement, you can reduce the risk by moving towards a debt bias.
Where to invest in a child's overseas education?
Mutual funds / PMS – Your child’s education is a long-term goal, and hence you can invest in mutual funds through a Systematic Investment Plan (SIP) or a lumpsum investment into a Portfolio Management Scheme(PMS) if the tenure is long enough and you have liquidity for a lumpsum investment. They give you great returns over time and safeguard your money from market volatility. It also avoids double taxation via the Double Taxation Avoidance Treaty (DTAA) rule, if eligible.
Global Investment Options: You can also invest in global funds through mutual funds, low cost ETFs or invest directly into the US stocks. It comes with an additional advantage. For example, if you invest in US companies, you create a hedge against currency risk. You give have double benefits to stock growth and from depreciation of rupee against dollar.
Unit Linked Investment Plan (ULIP) – As we mentioned above, you need insurance and investment options for your child’s education. You can fulfill these two goals through ULIP. With ULIP, a part of your investment goes towards the insurance bucket and the remaining towards the investment bucket. There are many ULIP plans with different features. Look for a ULIP that considers a child’s goals as one of the features.
Real Estate – Though many people don’t consider it an option for a child’s overseas education, it can be a good option if you have a lump sum amount to invest for your child’s future. The second important point is you should be able to find a property (residential or commercial) that has the potential to give you good returns.
Secure your child's future with us
Planning for the future is essential, but at the same time, it is tough for someone not into it. You need to have experience in planning and also the time to research to make the best investments. Right Horizons have years of experience making our client’s dreams a reality. Reach out to us if you want to enjoy your life while we take care of your crucial financial goals like a child’s overseas education.