This video discusses how you can use systematic withdrawal plans (SWP) for your child's higher education
Edited highlights
0:07 This video discusses how you can use systematic withdrawal plans (SWP) for your child's higher education
0:14 SWPs are offered by mutual funds and they can be used during your child's higher education
1:04 When your child's higher education begins you incur upfront lump sum expenses and regular expenses
1:16 Regular expenses could be tuition fee, books, hostel expenses and others
1:28 SWP from mutual funds are great for meeting regular expenses
1:41 SWP regularly sells mutual fund units to provide regular income
2:08 You can do SWP for an equity fund or a debt fund
2:11 Since, in this case you need a definite regular inflow, you need to have an SWP of a lower risk investment like debt fund
2:32 This ensures that you don't suffer volatility in the market
3:01 Start putting your savings for children's higher gradually in a debt fund 3-4 years before you need the money
3:22 SWP can kick in when you need regular income for your child's regular expenses during higher education
3:33 The idea is to tap into debt fund units that are more than 3 years old
3:39 Debt fund units more than 3 years old pay 20% long term capital gains tax and are also eligible for inflation indexation benefits
4:21 Through debt fund SWP you are making arrangements for tax efficient regular income during the period of the child's higher education
4:35 Remember, if in the SWP, units less than 3 year old are sold, the capital gains get added to your income and get taxed according to the applicable rate
5:05 The same regular income requirement will be there for higher degrees like postgraduate degree
5:28 Your plan for meeting child's higher education needs to address lump sum and regular income needs
