How Childrens’ Education Is Motivating Parents To Invest Overseas.
India's education landscape has changed tremendously over the past few years. 20 years ago, sending kids to an “English Medium” school was an aspiration for most parents.
Global investing has evolved fast in the past few years. Two years ago, access to global names such as Google, Netflix, Facebook was the primary driver for global investing. Investors wanted to own shares of big, popular companies, whose products they used on a daily basis. Some bit of it was also Interest was also driven by FOMO as the US market was on a tremendous bull run. But for the past few months we have seen investors seeking global markets for a different reason.
India's education landscape has changed tremendously over the past few years. 20 years ago, sending kids to an “English Medium” school was an aspiration for most parents. If one drove down the countryside, one could see English medium schools even in small towns & districts. Every parent irrespective of their economic status saw English medium school as a ticket to white collar jobs. But today there is a new trend. “International Curriculum” has replaced “English Medium” as the aspirational school for parents, thanks to the IT industry.
The growth of the IT industry created a new middle class. To serve their client needs they sent hordes of young engineers on “onshore” assignments. Most of these were from middle class families with no international exposure. But now they found themselves living in a developed country and living a new lifestyle. Many of them got married and even started families overseas. This made them experience first-hand the “international” education system. They found it less rote & more flexible than the traditional Indian education system. Hence, when they came back to India, they didn't want to deprive their kids of this “international” style of teaching. So they sought schools with an international curriculum. This created the demand for international curriculum schools. As more people joined the IT industry, the demand for such schools grew as well. Today, India is second only to China in terms of no. of international schools in the country.
If your expense is in dollars, it's better to save in dollars.
Since education is a big expense for most parents, they usually invest in an education fund. If one aspires to send their kids to the US or elsewhere overseas for higher education, it's better to save in a global currency rather than in INR. Many parents, especially the ones sending their kids to international schools, seem to have realized this.
For the sake of better understanding, suppose $100,000 (INR 75 lacs) is the current tuition fees for a US college and one has 10 years to build this corpus, then one will need to invest ~INR 4.7 lacs every year in a fund that returns 10%. If you save INR, then in 10 years one would have successfully built a corpus of INR 75 lacs, but it may not be enough.
You might still end up being short of paying the $100,000 tuition fee, because of currency depreciation. Assuming INR depreciates by 4% annually against the dollar, your savings of INR75 lacs will be approx. $68,000 at the end of 10 years. This leaves one unable to pay the tuition fees. If you add the 2% annual increase in US college fees then one’s savings will be woefully short of the $100K mark. The depreciation of 4% and fee increase of 2% are based on actual change of the last 10 years.
Saving dollars is easier than you think
Global investing was thought to be a grey area by many. People assumed it may create regulatory hassle and issues. The reality of the situation is quite the opposite. In fact most big banks like HDFC, ICICI etc. offer international investing through online platforms. One can easily invest in US stocks and ETFs through them. If someone wants hand holding in funds selection and monitoring and the right expert advisory on the subject, there now exist digital-first private wealth advisory platforms that offer dedicated advisory support for Indian investors.
LRS (Liberalized Remittance scheme) is the approved channel to send money overseas for investing. It is the same channel used to send money overseas for travel or education. One can do it online as well through most banks, otherwise there is an RBI approved A2 form that one can submit to their home branch and send the money.
Early investing is advisable for meeting any financial goal. So if you have enrolled your child in an international school, it's time you opened a global investing account today. It’s simple, affordable, and highly accessible.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
Around The World