Cost of Education : The Financial Planning Process
Learning is a life-long Journey and as a parent, you play an important role in the child’s future learning and planning. Planning for the child’s future is not something that we can decide to delay or postpone it requires immediate attention irrespective of taking into consideration your financial strata.
Gone are the good old days where the choice was limited and with such limited choices came simpler means and ways to achieve them. We are in the internet era coupled with globalization which has opened lots of opportunities for everyone, child included, this has led to increase in aspiration thus making education expensive.
Research reveals that education inflation in India has been between 10- 12 percent on an annual basis, though we were to be conservative, still it’s nothing less than 8 percent, which in itself will create a notable effect, thus its make evident that one has to be actively thinking yours child’s future.
Looking at the new developments in the education industry it’s would be challenging to gaze the future of cost of education. Let’s take an example, if the cost of Engineering course today in some premier institute cost 10 lacs, the same would cost about 50 lacs in another 15 years, likewise for a Medical education todays cost works out to about 35 lacs in a premier private college, the same would cost ~1.25 crore in the next 15 years.
Here are some of the financial tips which needs to be followed when planning for children’s future education.
Begin Early: Irrespective of the goal one would have, it would be wise to start early for best future possibilities, include the child’s own aspiration, apart from what you would foresee. Do a back envelop calculation of what her education is going to cost? Suggest not to wait for the child to make his decision, start your investment and start saving as early as possible, this will give you the compounding benefit helping you in the long run.
Government Schemes: For a girl child, Sukanya Samriddhi Yojana is one of the best and most affordable investment options available currently. By opening an Sukanya Samriddhi Account with about Rs: 250 one can keep accumulating funds, the account needs to be funded with minimum of Rs: 250 each year to ensure its active, one can enhance the value in Rs: 50 thereof, the advantage here is the funds deposited here, have a lock-in period until the age of 18 years with scheme being for tenure of 21 years, allowing partial withdrawal once the child attends 18 that too exclusively for education related expenses, rate of interest is usually higher than PPF and is tax-free.
Learning Abroad: The newer generation has this aspiration of seeking education from foreign institutions, and to meet this goal its necessary as a parent to start financial planning at least 15 years in advance, and for that one need to ascertain the cost that will be incurred for learning abroad.
Financial Habits: Another very important aspect is a good financial habit, teaching them about budgeting, tax rules, managing monthly pocket expense will help them during the living away period during learning and also thereafter when they start earning.
In short, it is very important to have a good saving plan in place to accomplish your and your child’s dream career. It also needs to be taken into consideration to allow the child to choose her career and must never be pushed in what we think is best for them. Hence as a matured parent one should allow them to dream big and achieve.
Team Empower