This website including the ‘[EduFund]’ platform is owned, operated and maintained by Helena Edtech Private Limited, a company incorporated under the laws of India. The platform and the services thereunder are provided on an "as is" basis. Use of the service and the platform is at your own risk. Company makes no warranty that the use of the service and the platform will be continuous, uninterrupted, bug-free, error-free, virus-free, free of defects, free of technical problems, nor that it will meet all of your needs. To the extent permitted by applicable law, Company expressly disclaims all other warranties, conditions, results, guarantees, or representations with respect to the service and the platform, whether express or implied, including, but not limited to, the implied warranties of merchantability, merchantable or satisfactory quality, fitness for a particular purpose, non-infringement of third party rights, or arising from the course of performance, course of dealing, or usage of trade.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. The valuation of securities may increase or decrease depending on the factors affecting the securities market.
EduFund and the EduFund App are the brand and product of Helena Edtech Private Limited
“An affiliate of the Company, i.e. Samyama Advisors Private Limited, is registered with the Securities and Exchange Board of India (SEBI) as an investment adviser under the SEBI (Investment Advisers) Regulations, 2013 bearing the registration number [INA000015321]. Samyama Advisors Private Limited may provide investment advice to the clients through the Company's platform.”
Registered Address: 30, Omkar House, Near Swastik Char Rasta, Navrangpura, Ahmedabad Gujarat, India – 380009
Transaction Platform Partner : BSE Star MF (with Member code-51573). CIN No: U67100GJ2020PTC112589. RIA Number: INA000015321 GST No: 24AAFCH2122L1ZU
Please scan QR code to download the EduFund app
Chasing goals using milestone plan
The education of their children remains an aspirational goal for every Indian parent. Every parent wants and strives to provide the best quality education and seeks to fulfil the dreams of their children. However, the burgeoning cost of education – both in India and abroad has been a cause of concern for the parents looking for higher education for their children.
While the cost of education in India has grown significantly over the past decade, the cost abroad is no better – owing to inflation in the local currency and rupee depreciation over the years.
Now, since education is getting expensive, it is critical to have a defined savings plan from an early age – something that is affordable for parents to keep aside and gives a runaway to accumulate. For example, if parents start to save for their child’s education immediately after the birth of the child, they would get a runway of 18 years for bachelors and 21-22 years for masters. Starting early would help the power of compounding to work in your favor and help you get closer to the goal with a smaller sum too. The amount kept aside for this defined and critical goal balloons with every year’s delay (see chart below).
2020
2030
Cost of Tuition Fees (Rs Lakhs)
25
49
Cost of Living (Rs Lakhs)
10
20
Total (Rs Lakhs)
35
69
Note: Inflation considered at 7% for both tuition fees and living cost
Source: EduFund Research
Cost of delaying – SIP amount increases with every year skipped
Note: Return of 12% is considered for the SIP computation
Source: EduFund Research
Let us now see an example of two parents – Abhishek and Sneha.
The situation at hand –
· Abhishek – Looking for Education Loan @ 8%
· Sneha – Looking to invest systematically and accumulate corpus in 10 years, expecting returns of 12%
Abhishek and Sneha want to send their child abroad for engineering education when she turns 18. While Sneha believes in accumulating the amount by investing in a mutual fund every month, Abhishek feels opting for an education loan makes more sense.
Both Abhishek and Sneha has a 10-year horizon where Sneha would save for the period aiming to make 12% returns annually, Abhishek is looking to repay the loan borrowed at 8%. Let us evaluate which is a better plan –
The Results
Corpus required –
2020
2030
Cost of Tuition Fees (Rs Lakhs)
25
49
Cost of Living (Rs Lakhs)
10
20
Total (Rs Lakhs)
35
69
Sneha’s investment plan –
Systematic Investment Plan (SIP) – Rs 30799 per month for 10 years
Note: Considering annual return of 12%
Source: EduFund Research
Abhishek’s loan plan –
Equated Monthly Instalment (EMI) – Rs 83716 per month for a time duration of 10 years
Note: Interest rate of Education loan is considered at 8% per annum, Tenure of repayment – 10 years
Source: EduFund Research
What we see is to reach her goal of global Education, Sneha set aside Rs 37K through SIP to accumulate the corpus. Abhishek, meanwhile, gets instant access to the corpus but ends up paying Rs 83716 as monthly instalments. Also, by the end of 10 years, he pays Rs 31 as interest making education cost rising 45%.
Both Abhishek and Sneha would have to make monthly payments, but Abhishek would pay substantially more every month. Abhishek would also spend much more on the same Education than Sneha.
When to use an Education Loan?
Despite starting to save early for a future defined and aspirational goal, a parent may still face a shortfall in the corpus. The reasons for the shortfall can be varied. For example, one instance could be because of the change in the nature of the goal. For instance, you might have budgeted for sending your child to Singapore but may end up sending to the US where the cost is comparatively higher. However, this possible shortfall is not an excuse but is a function of change in the plan. In such circumstances, it makes sense to fulfil the gap with an education loan. Also, it gets to avail a loan for part cost and not the full cost.
Is it possible to reduce your SIP initially and pull up?
Of course, yes, you can always go for a milestone planning where you can define a start-point, specific deadline and the final goal. This method ensures you map your SIP to your pocket size, and as time passes by, you tend to increase the outlay towards the goal. Thereby following an exponential roadmap rather than a simple straight line which may not be affordable in the initial years due to multiple other expenses.
To sum up, we can say the following –
This strategy will allow you to fund your child’s education with minimal stress.