Education, college, and a career are among what’s important when it comes to a child’s future. But just how much education can cost in fifteen, ten, or even five years from now may not be understood very well.
Take an engineering course, for example. A degree today from a good university can cost upwards of Rs. 7,00,000. Five years from now, at an inflation rate of 6 per cent, it will amount to at least Rs. 9.4 lakh. Extend this to ten years from now, and the amount required becomes Rs. 12.6 lakh. Living expenses as well, if the college is away from home, also has to be factored in, and adds to the education cost.
And remember, after an undergraduate degree, most students look to take up a post-graduate specialisation. More money. Some children would like to study abroad. The requirement swells further.
The only way to achieve the corpus needed is to begin investing now, and stay invested over the long term for the compounding benefit to take effect.
Axis steps in
It is this need for investing to build a corpus, and for the long term, that Axis Mutual Fund’s New Fund Offer (NFO), Axis Children’s Gift Fund, seeks to address. In this NFO, investments can be made only in a minor child’s name. And because it is small drops that make an ocean, anyone can make this investment in the child’s name – parents, grandparents, uncles, aunts, friends, you name it.
This is important, as it allows persons other than the parents to contribute to a child’s education. If you, say, wanted to gift your niece or nephew a sum of money to be used for her or his education, the Axis Children’s Gift Fund would suit your purpose. It’s certainly a better option than to invest the sum in lower-yielding fixed deposits, which is otherwise often the case. This feature is what sets the fund apart from other children’s gift funds.
Axis Children’s Gift Fund is an open-ended equity-oriented balanced fund. 40-60 per cent of the portfolio will be invested in equities, 5-15 per cent will go into equity derivatives, and the remaining will be in debt. The fund gives investors the option to keep the investment locked in until the child turns 18. If the lock-in option is not chosen, note that the exit loads on redemption before three years is steep.
Help with homework
In its effort to help parents estimate the cost of education – and stress on the need to plan and invest ahead – the fundhouse has launched a website – www.homework.axismf.com. The key feature on this website is a calculator to arrive at, approximately, how much could potentially be required for education, both for undergraduate and post-graduate degrees.
Available under ‘The How’ tab, various types of careers are listed – the usual chartered accountant, engineer, doctor, plus a few others such as lawyer, pilot, scientist, and such. Depending on the career choice, and the number of years left for the child to start college, the calculator throws up the total corpus needed. It then breaks the investment required into a lump sum amount that needs to be invested now, plus the additional monthly saving needed.
Of course, knowing exactly the career direction in which the child is headed is tricky. But for understanding both current higher education costs and how much they can increase, the calculator is certainly useful. It can help in designing a goal to work towards.
The Axis Children’s Gift Fund NFO is open now and will close on December 2, 2015. It will reopen by December 14, 2015. It will be managed by Pankaj Murarka and Kedar Karnik.