As the objective is to create a corpus that can be drawn down to pay for higher education, the investment portfolio should have both equity and debt. Setting aside money in a recurring deposit is a default choice, but a fixed income-yielding investment is akin to taking a slow train. The need is not for income, but growth, in the early days of saving. Choosing a growth-oriented product, such as an equity fund, enables growth in value, serving the need for a large withdrawal in later years. There are three strategic elements. The first is the allocation of investments to equity and debt, depending primarily on the number of years of saving, before the corpus is needed. An early start would enable investing at least 65 per cent in equity. The second is protection from volatility in equity markets as the time to draw on it approaches. A periodic rebalancing strategy is needed to convert the corpus into debt, before the withdrawal is due. The third is the de-risking of the corpus from any risks to income of the parents, on whom the child is dependent.

The space for children's education is crowded, given the emotional appeal. Mutual funds offer specifically named funds to encourage saving for children. These are nothing but hybrid products holding equity and debt, and not all of them do well. Choosing such hybrids may mean tying oneself to the performance of a given fund, unless there is a yearly review. Many of these hybrids underperform and need careful selection and review. There are some who buy their child an insurance policy. The investment is made over time, and a lump sum is paid in future. This might be a wasteful and low-return investment. The child does not need insurance and returns of this product may be undermined by the cost embedded.