Skip to main content

A Financial Plan for Education

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Interest cost variation can also be a burden when planning for higher studies

With the cost of education in India and abroad having increased significantly over the past few years, providing finances for higher education for one's children, has become as important a financial goal as buying a house or planning for retirement. Hence, it requires proper and systematic financial planning. Lets look at the steps involved in financial planning for higher education.

Determine one's current financial situation: Gathering details about finances - that is, your current income, expenses, savings, debts and investments.

Estimate funds required:

Researching the course your child wants to pursue and keeping note of the funds required in future for meeting such higher education plans.

Identify alternative course of action: Life is uncertain, so you must always be ready with alternative courses of action. For example, choosing alternative educational institutions (in case your child fails to secure admission in the institution that is his or her first choice), curbing unnecessary expenses and so on will help. While deciding on an alternative course of action you need to assess the risk and time value of money. You also need to consider personal values and economic factors.

Create and implement your financial plan: You should create a financial plan that takes into account the future costs of education and not just the current costs -this will mean budgeting for inflation, interest cost variations, and so on. For example, if your child is three years old now and you are planning for his or her education after the age of 20 years, the cost of education could look something like this: ( See the table)

You should consider the investments already made, such as Public Provident Fund (PPF), mutual funds, and so on for this purpose, and deduct it from the total corpus required.

For example, if there is already an investment worth ~20 lakh in various instruments, then the total funds required (assuming foreign study in our example above) would be ~47 lakh, which can now be amassed over 17 years.

Now let us consider the various investment options:

1) You could be invested in a PPF as it gives you tax free fixed interest rate, principal security and income tax deduction.

2) Investing in a Systematic Investment Plan of a mutual fund, will give better returns than most instruments - but at higher risk of capital loss.

3) One can save by creating a trust for children. One needs to make an irrevocable transfer to the trust, where money cannot be claimed back by the donor. All investments are made through the trust and the income generated can only be used in accordance with the purpose of the trust. The income from the investments is not clubbed with the donor's income, but the trust needs to pay the tax.

4) It is not wise to invest directly in equities with the money set aside for your child's education, as there is a lot of uncertainty in the stock markets and you could end up losing the invested money. Debt instruments would be a wiser option.

5) In case of any shortage, your child could opt for an education loan, which he/she could repay after her graduation. However, consider the monthly repayments, collaterals and interest rates before taking up such loans.

Interest paid on these loans are also fully deductible from taxable income under Section 80E up to eight continuous years, starting from the year in which the interest is first paid.

Tax benefits

Another area to keep in mind while planning for child's education is the tax benefits one is eligible for.

A parent can claim a deduction of payment made for tuition fee to any university, college, school or any other educational institution. The deduction on payments made towards tuition fee can be claimed up to ~1 lakh together with deduction in respect of insurance, provident fund and pension. It can only be claimed in respect of two dependent children and for fees to an educational institution within India and for tuition fee only.

Review and revise financial plan:

A financial plan is personalised and unique. This plan should be monitored and revised regularly keeping personal goals in consideration to ensure proper outcomes.

Course Current Future pursued price (~) price (~)*

M.B.A. in India 8 lakh 21 lakh Medical in India 15 lakh 41 lakh Foreign study 25 lakh 67 lakh

*After 17 years; assuming inflation at 6%

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

How to generate a UAN Online

Best SIP Funds Online   In order to make Employees' Provident Fund (EPF) accounts portable, the Employees' Provident Fund Organisation (EPFO) had launched the facility of Universal Account Number (UAN ) in 2014. Having a UAN is now mandatory if you have an EPF account and are contributing to it. So far, you got this number from your employer and every time you changed jobs, you had to furnish this number to the new employer.  However, in order to make it easier for you to get a UAN , and without your employer's intervention, the EPFO now allows you to go online and generate a UAN on your own. This facility can be used by freshers, or new employees, who are joining the workforce as well as by employees who have older EPF accounts but do not have a UAN as yet. As a new employee, you can simply generate a UAN and provide the number to your employer at the time of joining, when you need to fill up forms for your EPF contribution. As per a circula...
Read more

Reliance Regular Savings Fund - Debt Option

Reliance Regular Savings Fund - Invest Online     The scheme aims to generate optimal returns consistent with moderate levels of risk. It will invest atleast 65 per cent of its assets in debt instruments with maturity of more than 1 year and the rest in money market instruments (including cash or call money and reverse repo) and debentures with maturity of less than 1 year. The exposure in government securities will generally not exceed 50 percent of the assets. The fund uses a mix of relatively low portfolio duration with active investments in higher-yielding corporate bonds. It does not take aggressive duration calls but tries to improve returns by cherry-picking corporate bonds. This is reflected in the fund's returns matching the category and benchmark for five years - at 8.4 per cent - but lagging behind the category during a raging bull market in bonds in the last one year. The fund has been a consistent but not chart-topping performer in the income category. Despite its ...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

IIFL NCDs

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) IIFL NCDs IIF's six-year unsecured NCD 2012 Risk-wary investors should stay away from this issue, and even, risk-taking ones should think twice It is a public issue of unsecured redeemable non-convertible debentures ( NCDs ) by India Infoline Finance ( IIF ), an unlisted company, which is a 98.9 per cent subsidiary of India Infoline, a listed company. The issue seeks to raise Rs 250 crore with an option to retain over-subscription up to Rs 250 crore taking the total potential issue amount to Rs 500 crore. It will be open for public subscription from September 5 to September 18 with a minimum application size of Rs 5,000 in the form of five NCDs of face value Rs 1,000, TENURE & RATES: IIF will redeem the NCDs at the end of six years, and investors wanting out before six years will be able to sell the...
Read more

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now