How to fund child’s education: Take a loan or use own funds?

Keeping your accumulated savings invested and taking an education loan instead can benefit you. Photo: Alamy

Keeping your accumulated savings invested and taking an education loan instead can benefit you. Photo: Alamy

Any big-ticket spending requires you to either have the required funds in place or a financing option. When dealing with long-term financial goals, such as higher education of children, you have the advantage of planning much in advance. Here’s how you can go about the planning.

Start early

A lot of parents have an inclination to send their children abroad for higher education, at least at the post-graduate level, said Suresh Sadagopan, a certified financial planner and founder of Ladder 7 Financial Advisories. “In that case, the planning needs to start really early. They would need a horizon of at least 10-15 years. When we talk of international education at post-graduate level today, most likely it is not going to happen below ₹40 lakh,” he said.

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How do you work towards saving that amount? Prakash Praharaj, founder, Max Secure Financial Planners, said that the future cost of a particular course needs to be calculated taking into account at least 10% annual inflation. “Then calculate the current assets and investments accumulated for these goals. Then the remaining gap for the aimed amount is to be filled through monthly SIPs over the years,” he said.

Starting an SIP of ₹5,000-7,000 in an equity fund for 15 years and increasing it by 10-20% each year could help. However, Sadagopan said, given the fact that there are so many ongoing expenses these days, including other loans, it becomes difficult for parents to put aside a huge amount for the child’s post-graduation alone.

Consider taking loan

Even if you have been working on creating a higher education corpus, you need to consider taking an education loan. At present, the total expenses for higher education abroad could be in the range of ₹1 crore per child, Sadagopan said.

“A realistic thing that parents need to realise is that the child’s higher education is not their only goal. Retirement is also an important goal and they need to be aware of the fact that you can get a loan for all other requirements but not for retirement,” he said.

Own funds versus loan

But if someone has already accumulated the required amount, why should another repayment burden be taken on? The answer lies in two things, Praharaj said. “A cost benefit analysis suggests that taking an education loan and keeping the accumulated amount invested works in your favour. Moreover, it also helps in developing a sense of responsibility in the student. The realisation that a repayment has to be done by them keeps them focussed,” he said.

The math of keeping your accumulated savings invested and taking an education loan instead suggests that taking a loan results in significant benefits. For instance, if ₹1 crore is kept invested and an education loan for the same amount is taken, at the end of nine years, including the repayment holiday on the education loan, the net benefit could be around ₹87 lakh (see graph).

This includes the tax saved on repayment of loan. Borrowers of education loans can claim deduction on the interest paid, though not on the principal amount. Also, unlike in home loans, there is no limit to the amount that can be claimed as deduction.

Sadagopan said it is better that the parents keep the money with themselves and let the child take the loan. “In future if the child is struggling to find a job and pay back, you can step in to help at that point,” he said.

[“Source-livemint”]

Heritage reaches $46.7m in education funds

Education fund experts: Gerry Swan and Charles Jeffers of Heritage Agency (Bermuda) Ltd

Heritage Education Funds International has paid out a total of $46.7 million to families in Bermuda to fund their educational needs.

The organisation, which runs savings plans aimed at helping with the costs of postsecondary education, added that it has paid out $2.88 million in Bermuda in the first nine months of this year alone.

And during the past three years, the company has paid out more than $8.8 million to families on the island in savings and Educational Assistance Payments, commonly known as “scholarships”.

HEFI, which has offered its services on the island for more than three decades, stressed that with tuition costs for postsecondary education continuing to rise at an average of 5 per cent annually, saving for education is especially important.

If this trend continues, tuition for a four-year degree programme could exceed $160,000 in ten years, depending on the programme of study and the location, HEFI estimates.

Gerry Swan, HEFI’s director of Heritage Agency (Bermuda) Ltd, said: “We recommend parents start saving for their children’s college or university education as soon as they are born.

“Using a conservative 5 per cent rate of appreciation, parents may need more than $350,000 for a child born this year, to pursue a four-year degree programme in the US.

“The Heritage Plan is designed to encourage parents to save as much as they can comfortably afford now to reduce that financial burden when the time comes.”

He said his team was working to broaden HEFI’s reach across the island.

“We want more families to be aware of the Heritage International Scholarship Trust Plan and, more importantly, we want to make our education savings plan available to more parents and grandparents allowing them the comfort of knowing that through proper planning and prudent investing, funds will be there when they need it most.”

Student participants in the Heritage Education Savings Plan, who received their third and final EAP this year, benefited from a return of 6.4 per cent per annum.

The Heritage Plan is a US-dollar denominated savings plan which has, to date, benefited thousands of students from Bermuda attending postsecondary institutions at home, in the USA, Canada, the UK and other parts of the world.

Jason Maguire, president and chief executive officer of HEFI, said: “We are very proud of these numbers as they indicate that more families in Bermuda than ever before have been using our ESP to help fund postsecondary studies for their children and grandchildren.

“Year after year, HEFI continues to reach important milestones and exceed expectations.

“This is due, in no small part, to all of the Bermudian families and friends who want a better world for their children — one where their academic success isn’t limited by the price tag on education.”

Source:-royalgazette

Students turn creative to raise funds for design project

Reshaping spaces: The architecture students plan to create a vertical garden under the bridge on TTK Road.   | Photo Credit: R_Ragu

Hold painting exhibition under TTK Road bridge

The aspiration of a group of architecture students to compete in a contest has turned the space below the bridge on TTK Road colourful.

When 20-year-old Shruti Mohan and 20 other students of Mohamed Sathak AJ Academy of Architecture wanted to participate in the annual NASA Design Competition conducted by the National Association of Students of Architecture, which requires them to effectively utilise public space, they struggled to mobilise the necessary money.

Quickly, they put together some pocket money and decided to put on a painting exhibition on Sunday under the bridge itself.

“This painting exhibition is like a fund-raiser for implementing the project of creating a vertical garden on the pillars of the bridge. We have used insulation and used tyres, made them colourful and turned them into seats. Then, we approached some artists, who promised to give us about 50% of the sale money from their paintings to us,” she said.

They have about 100 paintings of many noted artists with the price ranging from ₹1,000 to ₹3 lakh. This project, they say, will cost them ₹6 lakh.

Dhanya M, another student, said, “We have been able to raise about ₹10,000 so far. We are hopeful of getting funds somehow.”

[“Source-thehindu”]

MobiKwik in Talks to Raise Funds, Eyes $1-Billion Valuation: CEO

MobiKwik in Talks to Raise Funds, Eyes $1-Billion Valuation: CEO
Indian mobile payments and digital wallet firm MobiKwik says it is in talks to raise more funds at a level that would give the start-up a $1 billion (roughly Rs. 6,698 crores) valuation, as it pushes to forge new ties with banks and offer new financial services on its platform.

The company, which has raised about $80 million (roughly Rs. 535 crores) in funding so far, will likely see a new cash infusion in the next month, or two, founder and Chief Executive Bipin Preet Singh told Reuters on Wednesday, while declining to comment on how big an equity stake the company might be offering to sell.

Asked about MobiKwik’s valuation, Singh said, “We should be touching a billion (dollars) soon … in the next one or two months.” He declined to comment on which parties MobiKwik is in talks with or how much money was being sought.

Singh said the company, which will likely break even in the middle of 2018, was at the same time not in a rush to raise funds as it remained well capitalised.

India’s decision to ban high-value currency notes late last year led to a cash crunch that hurt all sectors of the nearly $2 trillion economy, but it boosted the use of digital payments led by e-wallet operators such as MobiKwik and its larger rival Paytm.

MobiKwik now has 45 million users, Singh said.
“Some of the things that are going to happen over the next two to three months will actually lead to MobiKwik being the default payments partner for a lot of people and they already see us as a natural ally,” Singh said.

“I see a future where within the app you can avail yourself of many different financial services in addition to making payments,” he said. “Many of those will be far more profitable compared to payments alone.”

MobiKwik’s current investors include well known US technology venture capital investor Sequoia Capital, Taiwan’s MediaTek, Japan’s GMO Venture Partners and hedge fund Tree Line Asia.

The potential new fund raising could make MobiKwik India’s newest ‘unicorn’, following larger home-grown start-ups like Flipkart, Snapdeal, Paytm and Ola that have also managed to top the $1 billion valuation mark.

© Thomson Reuters 2017

Tags: MobiKwik, Mobile Payments, Digital Payments, Digital Wallet, Apps, Internet, India

[“Source-Gadgets”]