Support and secure your child’s career aspirations. Give wings to your child’s dreams.
Education costs have mounted by 10% to 12% in India between 2012-20. The total expense of schooling a child in a private school in India is approximately Rs. 30 lakhs. The average cost of higher education for a 3-to-4-year program ranges between Rs. 4 to 20 lakhs.
Build an education fund for your child
Why is it important to plan a child’s education in advance?
Raising and educating a child in India is an expensive affair. The uncomfortably high levels of education inflation rising from 0.63% in April 2021 to 4.12% in June 2022 has made education expenses unpredictable. Most schools across tier-I cities charge an admission fee between Rs. 25000 to 75000. Assuming both parents are employed and rely on day-care centres for 5 to 8 hours a day, this expense goes up to Rs. 2 lakh per year. The cost of college education for a 3-to-4-year course at a private institution range between Rs. 4 to 20 lakhs, coupled with the cost of coaching for entrance exams ranging from Rs. 30000 to 5 lakhs. It is estimated that the cost of higher education will increase 10% every year. Such scenarios make it essential to plan for children’s education as early as possible.
What are the factors to consider when planning for your child’s future education expenses?
You can attain your goal of providing your child with the best education by planning and managing your money ahead of time. First, determine if you are saving for your child’s primary or higher education expenses. Do you plan to send them to a top institution in India or abroad? Which field interests your child the most? Identify 2 to 3 career options and their current costs. Inflate it by considering a conservative inflation of 6% to 8% per year for the duration after which the child would need funds. For instance, if your child’s current age is 3 years and they are likely to enroll in a post-graduate program at the age of 18, then the time period of investment will be 18 – 3 years = 15 years. This will help you ascertain the amount of time you have for your money to compound.
How to invest for your child’s education?
To better manage funds, create a dedicated portfolio for child needs. Allocate funds separately if you have more than one child. Segregate the investments for education expenses as per short-term, medium-term, and long-term needs. For costs that are 10 years away, equity-oriented instruments like ULIPs with equity fund options or equity mutual funds can be the backbone of one’s portfolio. To accumulate funds for a goal that is 3 to 5 years away, you can opt for SIPs in balanced funds, debt mutual funds, FDs, or RDs. One may even consider opening a PPF account in the child’s name. This 15-year scheme would help build a tax-free corpus for the child and can be withdrawn partially anytime after the 6th year. Also, remember to de-risk the funds reserved for children’s education while you are three years away from the goal by moving from equity to less-volatile debt funds. The sooner you start the more you get to enjoy the power of compounding.