Their Story. Saving, by degrees -- funding overseas education

Pursuing higher education abroad is a dream chased by many parents. Giving their children the best education necessitates systematic saving and prudent investment in asset classes. So how do people go about saving for this goal? We spoke to three families that are planning to send their children abroad for higher education.

Radha Mukundan, who gave up her career as a cost and works Accountant to take care of the family, swears by equity.

“We put quite a bit of our savings into real estate in the early 2000s but soon realised it is illiquid and tax-inefficient. I have, hence, switched to equities and bet big on equity mutual fund schemes,” explains Radha, whose eldest son, currently pursuing a Bachelor’s in technology at BITS Pilani, will head to the US for his Master’s programme two years from now.

Likewise, V Venkatraman, who runs a manufacturing business in Chennai, is all set to send his elder son for a Master’s programme in science at Zurich. He plans to use his fixed income investment for this. “My elder son did his Bachelor’s programme at IIT Jodhpur and the fee was just ₹1.5 lakh per year. I did not have to spend much for it. However, for his overseas education, I have earmarked fixed deposit and recurring deposit investments,” says Venkatraman.

While he has largely tapped FDs and RDs for the elder one, he has moved to equity investing for his younger son. “I started investing in equity mutual fund schemes seven years back and I hope to use it for my second son’s education. He is currently in his Class 12 and hopes to get into one of the IITs for his Bachelor’s programme next year,” he says.

While investing in the right asset class yields reasonable, inflation-beating returns, investing systematically and early on is very important. Radha recounts that she had invested in real estate early on. However, “in the last few years, real estate has been under-performing and has not been tax-efficient. I have hence switched to equities,” she adds. She is happy, though, that her realty exposure worked out, thanks to the timing of her investment.

She started investing in the systematic investment plans of mutual funds in 2013 and believes that this not only develops the habit of saving but also gives healthy returns in the long term.

Sivakumar M, who is an office supervisor in a PSU, also feels good about having invested in real estate early in his career and has kept it as a fallback for his son, who will shortly join a Master’s programme in the US. “My wife, a banker, is a conservative investor. She started saving systematically through RDs and FDs and that has come a long way in giving our children quality education,” says Sivakumar.

Who makes the investment decisions in these families? Interestingly, the women have been big decision-makers.

Radha, who has a strong finance background, doubled up as an investment advisor. “My husband works for a large IT services company and is on the move. That leaves him with little time to plan family finances. Since I understand finance and accounts better, I handle it all, including investments. I do quite a bit of research on equities (and also mutual funds), analysing their track record and business performance, before investing,” she says.

Sivakumar feels women are better money managers compared to men. “They are very systematic and prudent when it comes to investing,” he asserts. He praises his wife’s investment decisions and says they have worked well for the family.

Venkatraman, an engineer by education, leverages his wife’s rich experience of nearly two decades in the financial services space, for making investment decisions.

Interestingly, equities seems to be the unanimous choice. “I am investing about 70 per cent of my savings in equity mutual funds and direct equities as I strongly feel that equities are the only asset class that can deliver inflation-beating returns in the long term,” states Radha.

Sivakumar, who was conservative all along, is also looking to invest a small portion of his surplus in equity mutual funds. “I had invested a very small sum in direct equities way back in the early 1990s and that has delivered stellar returns, but I did not invest further. I want to invest a small portion of our savings systematically in a good mutual fund scheme,” adds Sivakumar

Venkatraman shares the same view. “I have started investing in mutual fund schemes through the SIP (Systematic investment plan) route and think that will help me support our second son’s higher education.”

Systematic investment across different asset classes to balance risk and reward, and investing early hold the key to sound financial planning.

COMMENT NOW