How to Plan for Your Child’s Overseas Education?

Posted in Investment By Sajhyadri Chattopadhyay - Feb 20,2023
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Many students who are close to finishing their school education make ambitious plans to go abroad for higher studies or vocational courses. Going abroad to study in renowned universities around the world may also be on their cards. However, when it comes to a developing country like India, this is an endeavour easier said than accomplished. As the internet brought people from far corners of the world closer to each other, our access to information has gotten easier.  

Sitting anywhere in the world, we can browse the websites of universities, check academic rankings, scroll through their curriculum, view the campus, access testimonials, and make our choice. But overseas education is an expensive affair with even the basic tuition fees worth a hefty sum. Plus, visa expenses, accommodation fees, and travel costs can add to the hole in your wallet. While your ward tries to crack a scholarship exam for his/her dream institution, there are a number of steps you can take to fund their foreign education.  

The Pebble in Your Shoe

Various factors affect the process of raising funds for your child’s foreign education efficiently. From fluctuations in currency exchange rates to high inflation rates in the education sector, all these make it difficult to calculate your expenses. In this way, several students’ dreams to study abroad fizzle out due to a lack of funds. If you want to plan these finances properly, you have to remember two things. Firstly, take into account the expenses beyond the tuition fees of the course.  

Secondly, include more than just taking an education loan in your funding plan. Moreover, numerous banks are apprehensive about granting overseas education loans if the foreign college is not partnered with top-notch Indian universities like IITs, IIMs, etc. Accommodation, study material, and daily travel, add to the cumulative education expenses. Procurement of funds for studying abroad has been a longstanding challenge for many middle-class students, especially considering the recent economic distress in the post-pandemic world.  

Think Outside the Box

A well thought-out and planned approach towards raising funds can reap immense benefits to make your child’s international education affordable. These include the following steps –  

  • Where are you going?  

Perhaps the first and most important step in planning your child’s higher education is choosing where they want to go. This refers to not just the institute but also the country. If your chosen course is available around the globe, remember to shortlist those countries first that offer the best value for your money. Maintaining some flexibility in your choice of country and keeping your options open can prevent excessive financial burden.  

  • Sit with a calculator!  

Getting into all the big words like loans, investment, savings, etc., is in fact, the second step. First, sit down and make a list of all the expenses involved in studying abroad, from the day-to-day pennies to the larger pounds. Once you have set fundraising target set, you will find it easier to work backwards. Start planning early so that you can save more through a longer period. This will take the trouble of taking loans out of the equation.  

  • What are your financing options?  

Most financial experts will advise you to make a multi-faceted financing strategy for your child’s foreign education. Check out the basic tuition fees of your chosen course to get an idea and create a varied portfolio with saving schemes, investment tools, and funding from your income. For example, a graduation course in most international universities will cost you from ₹80 Lakh to ₹1 Crore. Keep aside a small monthly sum to have a sizable surplus ready whenever needed.  

  • Get a head start!  

Once you get the correct estimates and you start saving with sufficient time in hand, you can get a strong head start. The earlier you start saving or investing, the lesser money you have to put aside each month, thus keeping your regular payments and expenses unaffected. Suppose you start investing and/or saving money 5 years before your child finishes his primary education. Now, compare that with the amount you will have to cough up if you start managing your finances just one year in advance. Obviously, the former will be an easier choice.   

  • Where can you invest?  

Choose a blend of low-risk investment instruments with moderate returns for the best yet safest returns. These include low-yield funds, fixed-income products, exchange-traded funds (ETFs), etc. This will provide sufficient stability while your money grows at a decent rate. Systematic investment plans (SIPs) can also help you invest in diversified equity mutual funds over a long period. Beyond that, you can go for small-scale education loans to fulfil the rest of your funding needs.  

  • Find the right lender

In India, numerous banks and non-banking financial companies offer education loans or even personal loans for education. These sums vary in amount and interest depending on the lender, the term of the loan, your financial security, and other factors. Put some time in researching the rates and offers of education loans from both banks and NBFCs to get the best interest rates. As a bonus, you can also explore banks that are partnered up with international investment platforms.  

  • Why continue taking risks?  

Experts always advise moving your corpus to less risky investing tools as your fund requirement is close to completion. Aggressive market investing makes sense in the earlier stages of your fundraising to get significant returns. However, it is wise to cut down on these risks to protect this accumulated money later on. Instead, you can try investing in more secure tools like fixed deposits, corporate bonds, etc.  

Cover All the Bases!

A Social Impact Report compiled by the fintech company MPOWER Financing asked 4,943 students about the constraints they face when going abroad for higher education. 83% named high expenses and affordability issues the key barrier. Education loans are a go-to for most middle-class families in such times. But many students are not able to get the best loans from banks, due to absence of collateral, unstable finances, etc. As such, investment tools like mutual funds are a boon for these middle-class educational aspirants. The recent boost in financial literacy regarding alternate saving and investment ideas has also led to foreign universities becoming more approachable for Indians.  

If your child has his eyes set on an international institute for future studies, the onus is on you to financially guide him to that goal. Regularly set aside a small sum of money and split it equally between investment and saving schemes. Low risk earning tools like ETFs, debt funds, and ELSS can earn you decent returns on your investments. Similarly, saving up a portion of your money in secure schemes like fixed deposits, recurring deposits, etc. help your child scale new peaks with the best learning and education!  

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