Loans act as a helping hand in our lives to fulfil various life goals, right? And at whatever stage we are in life, whether as a new joiner in a first job or getting married or when raising kids, loans give us the required funds to bridge the gap between reality and these life goals and other monetary requirements like financial emergencies.
Especially when we become parents and have to plan for a child’s education for a solid future and career, already repaying a personal loan in Hyderabad can make it difficult to adequately plan and create a corpus for it. This is even more difficult when planning to send a child abroad for higher studies.
In such scenarios, we often hear that the rupee is falling and becoming weaker than other foreign currencies like the dollar or euro. Parents who would have planned for their children foreign education goal and might even be saving can become worried during this scenario because now the corpus required would be higher.
Even if we look back at any of the rupee’s worrisome continuous fall against the US dollar, like when the rupee’s value had depreciated from around Rs.64 in October 2017 to Rs.73-74, implying that parents would have to shell out more for the same course’s expenses, as compared to what they were paying previously. And this was one of the many instances when parents aiming to send a child abroad for studies could be worried.
And with expenses such as exam fees, tuition fees, travel costs etc., all at the risk of a rise during such adverse circumstances, parents need to revisit their investments made in order to accumulate a corpus for their child’s higher education abroad. And at the same time, they have to ensure that they do not fall short of funds to timely repay EMIs of personal loan in Hyderabad.
How to hedge or manage currency value fluctuations
Firstly, to meet the shortfall in the target corpus, parents who have already taken an instant loan in Delhi would need to prioritize the task of re-balancing their investment portfolio in case they had not taken into consideration the risk of rupee’s depreciation and inflation costs while deciding upon the corpus ‘amount.
And if you are wondering how parents can plan to meet the deficit for achieving this goal, there is a way out. Parents who had been investing through SIPs can fulfil the shortfall by increasing their SIP amount according to the amount of deficit in the corpus and as per the number of years left to achieve the desired corpus.
Once you have determined the amount of shortfall as per the change in rupee’s value, consider using the online SIP calculator available on various financial marketplaces to determine the required increase in the monthly SIP amount, corresponding to the increase in corpus required.
In case the goal is still a few years away, and you are in the midst of tenure of an instant loan in Delhi, parents can consider increasing the proportion of equity in their investment portfolio in order to meet the deficit since equities have proven to consistently provide inflation-beating returns, especially in case the investment horizon is above 3-5 years.
However, parents may even consider availing of a personal loan in Hyderabad to meet this deficit since personal loans do not involve any restriction on where and for what purpose you want the funds, except speculative purposes, of course.
Where should parents be investing in children’s foreign education goals?
With the rising education costs, especially for higher education abroad, parents must invest in equity mutual funds through the SIP route since equities have consistently proven to provide inflation-beating returns over the long term and to opt for the SIP route would save them from the risk of timing the market well.
Parents currently also paying the EMIs of personal loan in Hyderabad should begin investing as soon as possible, ideally by the time the child attains the age of 4-5 years. This would enable them to create sufficient corpus and not burden their monthly finances as well, since they would have an investment horizon of at least 10-12 years by the time the child attains the age of 18 & is ready to go abroad for higher education.
Risks that parents should consider while saving for children’s foreign education goal
While doing financial planning to accumulate a corpus for their child’s higher education abroad, especially when you are also sim; tenuously repaying the instant loan in Delhi, parents need to take into consideration the risk of inflation and the rupee’s possible depreciation, similar to the current scenario involving rupee’s downfall. The inflation effect would imply that the entire cost of the course would be higher by the time the child is of the age of 18, as compared to what it is right now. Therefore, ignoring inflation and not considering the possible fluctuations in the rupee’s value would lead to the accumulation of insufficient corpus.
What strategy to adopt when nearing the investment corpus goal?
Since funding a child’s higher education abroad requires a huge amount of corpus besides taking care of ongoing debt repayment like an instant loan in Delhi, most parents begin investing in equity mutual funds through SIPs about 10-15 years prior to the age by which child would be ready to a attain higher education, i.e. usually 18 years. However, since equities are a volatile asset class, keeping your accumulated corpus into equities till the very end may prove to be a risky move.
Parents must ideally shift their investments to less risky investment avenues about 2-3 years prior to achieving this goal. And then consider shifting your accumulated corpus into less risky avenues such as debt mutual funds or high yielding savings accounts, since these provide a higher degree of safety as well as liquidity, which would enable you to withdraw the investment as and when required. And amidst all this, do ensure that the monthly repayments of your personal loan in Hyderabad do not get disturbed in the quest to adequately fund your child’s higher education. Remember that missing out or defaulting on loan EMIs can not only attract penalties but even harm your credit score.
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