Start an SIP to Manage Your Education Expenses

It is every parent’s dream of providing the best possible education to their child. Access to sufficient finances is probably the biggest hurdle to fulfilling this dream. As a parent, you may want to provide the best education for your child, but reality is not as easy. The cost of education has been rising significantly over the past few years. In today’s day and age, something as basic as primary education could cost you to the tune of lakhs. Higher education, especially in a foreign university could become a major life expense.

While the escalating cost of education is not something you can control, what you can do is begin investing early towards such an expense. A systematic investment plan (SIP) can help you do that seamlessly.

Investing through SIP for education:

Today’s inflationary times demand a financial strategy to create a substantial corpus for your child’s education. This can be done in the following manner:

Know your goal

You need to set a goal which accommodates the educational aspirations of your child and the likely cost of education in the future. While present trends may change, the requirement for saving money for expensive higher education remains the same. The future cost could be calculated by taking into account the present costs and an estimate for inflation. Once this is determined, a SIP can help you begin early and invest regularly towards the goal, with the potential of building a significant corpus.

Lock-in your time horizon

You need to figure out the time horizon required to fulfill the goals. This will give you clarity on the periodic SIP amount you need to invest and the kind of funds you can invest in. E.g., if you want to invest in equity funds, a long-term horizon of 10-15 years will work better.

Portfolio diversification is the key

Since it’s the matter of your child’s education, it is always prudent to diversify. You can invest in more than one fund or in funds with exposure to different asset classes based on your risk appetite. E.g., you could two SIPs: one in an equity fund and another in a debt fund.

Keep an eye on the performance of the funds

It is essential to review your portfolio on periodic intervals. Compare your fund's performance with the relevant benchmark index as well as with mutual funds within the related segment. In case your fund is underperforming consistently, it is better to shift your SIP to another better performing fund.

Be sure to make an early start with SIP towards your child’s education. This is because when you begin early, it gives more time for your money to grow in tandem with your aspirations for your child. Ujjwal bhavishya ki Shuruaat SIP se!

Disclaimer: This article represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

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