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Investing for Education

“Your child’s education is likely to be one of the largest expenses your family will plan for.” – Rohin Pagdiwala

“Children’s education is one of the biggest cash outflows that families must plan for” – Rohin Pagdiwala

Planning for your child’s education

Higher education has become a major expense for families. In India, a four-year undergraduate degree at a private college can cost roughly ₹8–20 lakh in total, and a two-year postgraduate programme ₹25–70 lakh or more, depending on the institution.

Studying abroad costs considerably more. For 2025-26, annual tuition at Ivy League universities in the US ranges from about US$59,000 to US$71,000. Once housing, food, books and other expenses are included, the total cost is about US$87,000 to US$96,000 a year.

So how does a family prepare for such large expenses, and how should they invest for them?

A useful starting point is to plan for education costs rising by around 10% a year. Education costs have historically risen faster than general inflation, which makes planning harder. One advantage, however, is that you know roughly when you will need the money, so you can plan around a clear time horizon.

Figures are indicative, as of September 2026, and vary by institution, course and location. Cost-escalation assumptions are for illustration only. This content is for general information and is not investment advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.

Pagdiwala Investments | AMFI-registered Mutual Fund Distributor | ARN-186203 | APMI-registered PMS Distributor | APRN-00370

Depending on when you start (earlier is better), the investment strategy may differ. But here are some general principles:
Start early, and consider investing in your child’s name

Consider starting SIPs for your child’s education as early as possible, ideally soon after birth. Starting early gives you a long runway of around 18 years to build the corpus and allows even modest monthly amounts to grow over time.

Investing in your child’s name also helps keep the money set aside for its purpose and makes it less tempting to use it for other needs.

Why equity has a role in education planning

Over long periods, equities have historically delivered higher returns than most other asset classes in India, though with much larger ups and downs along the way. For example, the Nifty 50 TRI has delivered a compound annual return of 12.38% since its base date in April 1996, and 8.32% a year over the last five years, as of 31 August 2026 (source: NSE Indices, Nifty 50 factsheet, August 2026). Even so, returns can be uneven: the same index is down 7.00% in 2026 so far.

For goals that are many years away, such as a child’s higher education, equity-orientated investments can therefore help your savings keep pace with education costs, which are rising faster than general inflation. Equity returns are not guaranteed, however, and values can fall sharply in the short term. That is why the long time horizon matters and why it helps to move the corpus gradually towards lower-risk investments as the goal approaches.

Past performance may or may not be sustained in the future and is not a guarantee of future returns. Mutual fund investments are subject to market risks; read all scheme-related documents carefully.

Protect your child’s future with life cover

One of the most important steps in planning for your child’s education is protecting it against the unexpected. If either parent were to pass away, the family could face a lasting financial setback, and education plans could be affected.

A pure term life insurance policy is usually the most cost-effective way to provide this protection. When deciding on the amount of cover (the sum assured), consider your family’s ongoing living expenses, any outstanding loans, and future goals such as your child’s education, after accounting for savings and investments you already have. Consider cover for both parents, as the loss of either can affect the family’s finances.

We can help you work out a suitable level of cover and compare term plans from different insurers.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read the policy brochure and policy wording carefully before concluding a sale. [Pagdiwala Investments acts as a corporate agent; IRDAI registration no. AILI2905240100.]

Save more every year

Just as you would for your own retirement, it is prudent to increase your savings for your child’s education as your income grows. One simple way to do this is a step-up (or top-up) SIP, which automatically raises your SIP amount by a fixed amount or percentage each year.

Consider a hedge against rupee depreciation

If you plan to send your child abroad for higher education, you could consider including some international equity exposure, such as US equity funds, in the education portfolio. These fees will be paid in foreign currency. Investments whose value is linked to overseas markets and currencies can therefore partly offset the impact of a weaker rupee while also helping to diversify the portfolio.

However, international funds carry their own risks. Their value can fall due to overseas market movements, and currency movements can work in either direction. They are also taxed differently from Indian equity funds, and some international funds occasionally restrict fresh investments because of overseas investment limits set by SEBI. We can help you decide whether, and how much, international exposure suits your plan.

Get professionals to help

If all this is too much to manage, get assistance from financial advisors. Do not be penny wise, pound foolish.

Things to know about investing in a minor’s name:

  • The child must be the sole holder of the investment. A parent or court-appointed guardian manages it until the child turns 18.
  • You can pay from the child’s bank account, the parent’s or guardian’s account, or a joint account of the child with the parent or guardian. Redemption proceeds, however, are paid only into the child’s own verified bank account, so you will need to open one.
  • SIPs stop when the child turns 18. The account must then be converted to the child’s name as an adult, with the child’s own KYC, before any further transactions. After that, the money legally belongs to your child, and the parent can no longer transact.
  • Income and gains from investments in a minor’s name are generally added to the parent’s income for tax purposes.

We can help you choose an approach that suits your family’s goals and timeline.

This content is for general information only and is not investment or tax advice. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. 

Sources:

Speak to us today about planning for your child’s future.
There is no fee for our consultations: as a mutual fund distributor, we are paid through commissions from fund houses, which we disclose to you.

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