Manya’s key goal is to fund her higher education. She has to first ascertain whether her savings would be adequate to cover her education costs. She should build in a conservative rate of return (use a bank deposit rate) on her investments in which she will deploy her savings. She can seek a bank loan for the balance amount. She should choose her management school with a good placement record so that she can repay the loan without any difficulty. Her focus should be on increasing savings so that her loan amount is lower to that extent and repayment does not become a problem.
Since her parents are willing to support her routine needs, Manya should use this to increase her monthly savings. If rent, food, health, transport and such routine expenses are taken care of by her parents while she works, she will have a higher saving surplus. She should not move out on an emotional impulse, as it would increase her expenses and significantly reduce her ability to save. Her parents may be willing to see this arrangement much better compared to funding a large sum for her higher education. They may also be willing to guarantee her education loan, instead of funding her directly.
Since Manya knows that she will need an education loan in the future, she should work on building a good relationship with her bank. She should ensure that she builds her deposits and investments through one bank account and should keep a clean record. She should use the credit card judiciously at this time, and not take personal loans. If she takes a loan, for example, to buy a car, she should repay it on time and maintain a good credit record. Since what is not saved ends up being spent, Manya should begin a systematic investment plan that auto-debits her account towards investment, even before she has money to spend.
Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.