Planning for Child's Education

As the new academic year starts, many parents once again experience how quickly education costs are rising. School fees, tuition classes, books, uniforms, transport, extracurricular activities and other expenses keep increasing every year. As your child grows older, these costs only become bigger, especially when it comes to graduation, post-graduation, professional courses and foreign education.

A child’s education is not only an emotional priority for parents but also one of the biggest financial goals for any family. Every parent wants to give their child the best possible opportunities. But quality education, especially higher education, cannot usually be funded from regular monthly income alone. It requires proper planning, disciplined investing and an early start.

Setting Goal

A financial goal is any large expenditure that cannot be managed comfortably from current income. Your child’s higher education clearly falls into this category. Whether your child studies in India or abroad, whether they pursue medicine, engineering, management, law, finance, design, technology or any other professional course, the cost can be very large.

The important point is that today’s cost will not remain the same in the future. Education inflation is usually higher than normal household inflation. Fees for good colleges, professional courses and overseas education tend to rise significantly over time. This makes it necessary to plan early. Suppose your child is likely to start higher education in 15 years, and the estimated cost of that course today is INR 30 lakh. If we assume education inflation of 7% annually, the same education can cost around INR 83 lakh after 15 years. 7% is just for an example, because education inflation is much higher.

If the child wants to study abroad, the numbers can be even more significant because parents also need to consider tuition fees, accommodation, food, travel, currency fluctuations and other living expenses. A course that looks expensive today can become much more expensive by the time your child is ready for it.

Consistent Investing

To build a corpus of around INR 83 lakh over the next 15 years, consistent investing is essential. Assuming an annual return of 12% through a systematic investment plan (SIP) in mutual funds, you would need to invest approximately INR 18,000 per month to reach this target.

This SIP should be exclusively dedicated to your child’s education fund. Other goals such as retirement, home purchase, vacations or your child’s wedding should have separate investments. Mixing all goals into one investment can create confusion and may lead to shortfalls later. SIP can also be understood as “Sapna in Progress” - a dream that moves closer to reality with every disciplined monthly contribution.

Right Investments

For long-term goals like child education, saving money in low-return products may not be enough. To beat inflation and create meaningful wealth, parents should consider growth-oriented assets such as equity mutual funds, stocks and gold.

Final word

Your child’s education is one of the most important investments you will ever make. Start early, invest sufficiently and regularly. A well-planned education fund will ensure that when your child is ready to chase their dreams, money does not become the reason to compromise.

(The author is Chartered Accountant and CFA (USA). Financial advisor. Views personal. He could be reached on 9833133605)