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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 04, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by R on Jun 25, 2025Hindi

i m 43 years old with 3 kids all studying in class 8, earning 2L pm, I have a two Hsg Loan of total 50L, one loan just started and the other will be closed in 4 years time. School fees emi 40k per month from April to October. I m investing 10000 pm in SIPs. How can I plan for kids higher studies?

Ans: At 43, with three children in Class 8, you are entering a critical phase of financial planning. You are earning Rs 2 lakh per month, holding two home loans totalling Rs 50 lakh, and investing Rs 10,000 monthly through SIPs. Your school fee commitment is Rs 40,000 per month for 7 months annually. You have not mentioned any LIC, ULIP, or insurance-investment plans, so we will proceed assuming no such commitments.

Let’s assess your financial situation and work on a complete, 360-degree plan to help you secure your children’s higher education goals.

Understanding Your Current Financial Commitments
You are already handling several ongoing responsibilities. Let's understand your outflows better:

EMI on home loans: Two housing loans. One nearing closure in 4 years. One just started.

Education fees: Rs 40,000 monthly for 7 months totals Rs 2.8 lakh annually.

SIP Investments: Rs 10,000 monthly in mutual funds.

Basic household expenses: Not mentioned but assumed around Rs 50,000–Rs 70,000 monthly.

This means over 70–80% of your income is already committed. That’s fairly tight, but workable with a disciplined approach.

Estimating Education Costs for Children
All three children are in Class 8. So, higher education (college) is likely in 4–5 years. In today’s terms, graduation (engineering, medical, law, design, commerce, or arts) in India can cost anywhere between Rs 10 lakh to Rs 25 lakh per child. Overseas education will cost significantly more.

For three children, even assuming basic professional degrees in India, you may need Rs 60–75 lakh in today’s value. With inflation, this amount will double in 5–6 years.

So, a robust and disciplined strategy is needed to reach this target.

Assessing Your Current Investment
You're investing Rs 10,000 per month through SIPs. That’s Rs 1.2 lakh per year. Over 6–7 years, this will compound well. However, alone it won’t be enough for three children’s higher education needs.

You need to gradually increase your monthly investment as loan EMIs reduce and income grows.

Step-Wise Strategy to Plan for Higher Education
Here’s a focused approach to prepare for your children's future:

1. Prioritise Goal-Based Investments
Create three separate goals – one for each child’s education.

Keep timelines clear – most likely staggered by 1–2 years.

Start individual SIPs or earmark separate portfolios for each.

2. Increase SIP Amounts Gradually
Your SIP of Rs 10,000 per month is a good start.

Once the first home loan closes (in 4 years), divert EMI savings to SIPs.

Also, consider increasing your SIP amount by 10–15% every year.

This can be done through Step-Up SIPs or manual increase.

3. Choose Actively Managed Mutual Funds
Avoid index funds. They follow the market and don’t beat it.

In volatile years, they fall equally with no downside protection.

Active funds are managed by expert fund managers. They choose quality stocks.

These can outperform during both up and down cycles.

The long-term alpha can support your education goals better.

4. Use Regular Plans Through a MFD-CFP
Regular plans offer continuous review and support.

MFDs with CFP qualification provide tailored advice.

Direct plans miss this personalised advice.

Wrong choices in direct funds can cost more than any savings in fees.

Stay invested in regular plans and get ongoing portfolio reviews.

Rebalancing as the Goal Nears
As your children approach Class 11 or 12:

Start moving money gradually from equity to hybrid or debt funds.

This avoids last-minute risk from market downturns.

Use short-term debt or conservative hybrid funds closer to goal dates.

Review this shift every 6 months with your MFD-CFP.

Reassess Insurance Coverage
Though you didn’t mention insurance, at this stage:

You must have term life cover of at least 10 times your annual income.

That’s around Rs 2 crore minimum.

Health insurance for the full family is also essential.

Avoid investment-insurance mix policies like ULIPs or endowments.

They give poor returns and insufficient cover.

If you already hold such products, consider surrendering and moving funds to mutual funds. But only if surrender is allowed without major loss.

Emergency Fund Management
With home loans and children’s education needs, a strong emergency fund is critical.

Keep at least 6 months' expenses in liquid or short-term debt funds.

Don’t depend on FDs alone, as they may break long before maturity.

Emergency fund keeps your SIPs uninterrupted during income gaps.

Education Loan as a Backup Strategy
If you fall short, consider education loans for college.

This keeps your investments intact.

Children also get tax benefits on repayment under Sec 80E.

It also makes them partly responsible and financially aware.

But this should be your Plan B, not the main plan.

Avoid Real Estate for Education Goals
You already hold two housing loans. Avoid investing in property again.

Real estate has poor liquidity.

Resale takes time and involves high transaction costs.

It won’t align with your goal’s timing.

Stay focused on mutual funds and structured portfolios.

Focus on Gradual Liquidity Creation
From Class 10 onwards:

Slowly start building liquidity.

Move gains from equity funds to hybrid or debt funds.

Avoid doing this all at once.

Staggered switch over 1–2 years reduces risk.

This strategy gives you access to funds exactly when needed.

Tax Planning Around Mutual Funds
From April 2024, equity mutual funds have new tax rules.

Long-term gains over Rs 1.25 lakh taxed at 12.5%.

Short-term gains taxed at 20%.

For debt funds, gains taxed as per your income slab.

So, plan redemptions smartly.

Take out money across financial years if needed.

This minimises tax outgo and improves post-tax returns.

Keep an Eye on Education Inflation
Education costs rise faster than general inflation.

Budgeting today’s cost is not enough.

Review fees, college trends, and course expenses every year.

This helps you stay aligned with actual needs.

Also, account for hidden costs like books, gadgets, hostels, and travel.

Income Enhancement Can Speed Up Goals
You are earning Rs 2 lakh monthly.

Any future hike or bonus must be partly redirected to SIPs.

Avoid lifestyle inflation.

Use at least 30% of every hike for investing.

Also, any windfall (gifts, property sales, incentives) should boost your children's education fund.

Debt Management for Peace of Mind
You hold two housing loans.

Try to avoid prepaying the new home loan for now.

Use surplus for investing instead.

Once the first loan closes in 4 years, use that EMI to invest fully.

Don’t take new loans for consumption or luxuries.

Staying debt-light gives you more freedom to invest.

Behavioural Discipline is the Key
The biggest risk is not market volatility. It is inconsistent investing.

Don’t stop SIPs during market dips.

Avoid frequent switching of funds.

Don’t check NAVs daily.

Stick to your goal plan.

Review only twice a year.

Investing is more about patience than predictions.

Finally
You are doing a great job managing education and home with Rs 2 lakh monthly income. Starting SIPs, managing fees, and continuing EMIs show good discipline.

But higher education will need a bigger effort now. Focus on:

Clear goal plans

Gradually increasing SIPs

Choosing active funds via MFD-CFP

Managing debt and liquidity better

With consistent steps, you can give quality education to all three children, without stress.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.