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How to Use Glide Path Investing in Planning For Your Child's Education

Planning for your child’s education is an essential financial goal for parents. With rising costs and the unpredictable nature of markets, selecting the right investment strategy can make a significant difference.Read More

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry, with a strong understanding of the insurance sector.
Reviewed ByRosy Pathak
AboutRosy Pathak
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Rosy Pathak, AVP- Product and Brand Marketing at Bajaj Allianz Life Insurance carries over 17 years of experience in Marketing and a demonstrated history of working in the insurance industry. She is skilled in Product Management, Planning and Strategy, Project Management, Marketing and Communication.
Written on: 8th January 2025
Modified on: 9th January 2025
Reading Time: 15 Mins
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What is Glide Path Investing?
 

Glide path investing is a systematic investment approach where the portfolio allocation evolves as you approach a financial goal. In the context of child education planning with glide path investing, this strategy involves gradually shifting from high-growth assets like equities to more stable investments like bonds or fixed-income instruments as the education goal nears.[1]

The method aims to maximize growth during the initial years while minimizing risks closer to the target date.

Why is Glide Path Investment Important for Child Education?
 

Parents need a reliable plan that considers inflation, market volatility, and the specific timeline for achieving this goal. Glide path investing for child education provides a structured approach by offering: [1]


Aligned Risk Management:


Higher exposure to equities in the early years provides growth, while conservative investments protect capital closer to the goal.


Time-Based Adjustments:


Investments automatically adapt as the education milestone approaches.


Inflation Protection:
 

Equities can help counter rising education costs over the long term.


How to Implement Glide Path Investing for Child Education
 

1. Set Your Education Goal
 

Estimate how much you need for your child’s education, considering future costs and inflation. For example, if a college costs ₹15 lakh per year and inflation is 5%, you might need around ₹80 lakhs in 5 years with 5% inflation rate. This however will vary depending on your child’s age and your location, so it’s important to calculate accurately and adjust for rising education expenses over time.[1]

2. Choose Your Investment Mix
 

Begin by choosing a mix of high-risk and low-risk investments. For the first few years, focus on equities (stocks) since they offer higher growth potential. A typical starting allocation could be 60% equities and 40% debt (such as bonds or fixed-income funds). As the time to your child’s education gets closer, gradually shift more money into safer, low-risk debt instruments to protect your accumulated savings.[1]

3. Start SIPs (Systematic Investment Plans)
 

Set up monthly contributions to your investments, like a Systematic Investment Plan (SIP), which helps you invest regularly and build wealth over time. For example, if you need ₹80 lakhs in 5 years, you might start with ₹27,500 per month. Additionally, increase your SIP by 5% annually to keep up with inflation, making it easier to reach your goal as your income grows.[1]

4. Monitor and Adjust
 

Regularly review your investment progress and make adjustments if necessary. If markets drop or there are changes in your financial situation (like a salary increase), consider increasing your SIP or adjusting the asset allocation. Glide path investing is about flexibility—your plan should adapt to life changes, while still aiming for the long-term goal of funding your child’s education. [1]

5. Stick to the Plan
 

Once you’ve set your glide path, avoid making emotional decisions based on market fluctuations. Markets can be volatile, but sticking to your plan will help you stay on course. Focus on the long-term goal of funding education, and don’t panic if the market temporarily dips. Patience is key to a successful glide path investment strategy. [1]

Example of Glide Path Investing for Child Education
 

Let’s take an example to illustrate how glide path investing works:

  • Scenario: Your child is 3 years old, and you want to accumulate ₹50 lakhs for their higher education by the time they turn 18.
  • Time Horizon: 15 years.
     

Stage 1: Early Stage (Years 1-10)
 

  • Allocation: 70% equities, 30% debt.
  • Instruments: Equity mutual funds, index funds, and balanced advantage funds.
     

Stage 2: Mid Stage (Years 11-14)
 

  • Allocation: 50% equities, 50% debt.
  • Instruments: Hybrid funds, debt funds, and conservative hybrid funds.
     

Stage 3: Final Stage (Year 15)
 

  • Allocation: 20% equities, 80% debt.
  • Instruments: Fixed deposits, short-term debt funds, and government bonds.

    By following this approach, you can ensure that your portfolio evolves to match your financial goal while managing risks effectively.
     

Conclusion
 

Glide path investing for planning child education offers a structured and risk-adjusted way to achieve your financial goals. By understanding your timeline, learning how to diversify diversifying investments, and gradually adjusting your portfolio, you can ensure that the funds needed for your child’s education are available when required. [1]

 

FAQs
 

1. What is the advantage of glide path investing for child education
 

Glide path investing helps manage risks effectively by adjusting asset allocation as the education goal approaches.
 

2. Can I use glide path investing if I start late?
 

Yes, but the strategy will need to be more conservative due to the shorter timeline.
 

3. How do I calculate the corpus for my child’s education?
 

Use calculators like child insurance calculator or consult financial advisors to estimate costs based on tuition fees, inflation, and other factors
 

 

 

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Nifty 500 Multifactor 50 Index Fund is available Bajaj Allianz Life Future Wealth Gain IV - A Unit- linked Non- Participating Individual Life Savings Insurance Plan (UIN:116L202V01), Bajaj Allianz Life Goal Assure IV - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L204V01), Bajaj Allianz Life LongLife Goal III is A Unit-linked Non-Participating Whole Life Insurance Plan (UIN:116L203V01), Bajaj Allianz Life Invest Protect Goal III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L205V01), Bajaj Allianz Life Magnum Fortune Plus III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L207V02), Bajaj Allianz Life Goal Based Saving III - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN:116L206V01), Bajaj Allianz Life Fortune Gain II- A Unit-linked Non Participating Individual Life Savings Insurance Plan (UIN- 116L196V02) and Bajaj Allianz Life Smart Wealth Goal V - A Unit-linked Non-Participating Individual Life Savings Insurance Plan (UIN: 116L201V03)

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