As you come across newspaper advertisements and TV commercials of a young kid dressed up in robes smiling away at the cameras with a scroll in hand, it paints quite a picture. Suddenly your mind starts racing ahead and you imagine your child in such a happy moment. But that imagination is cut short when you start thinking about the money required to secure your child’s future.

Saving for your children’s education is of utmost importance. Putting your child’s needs before yours by trying to seek the best possible education for their future requires you to prepare a sound financial plan in this ever increasing world of rising costs and rising inflation. With education becoming expensive with every passing day from primary to secondary to higher studies, it is essential to plan for it early by investing in investment avenues that deliver inflation-adjusted returns while leaving enough to meet future expenses.

Gather Adequate Information and Estimate Costs You may not immediately know what your child wants to be 15 or 20 years down the line but getting a rough idea of what your child’s education in future would be the best start. With junior education currently starting anywhere between Rs. 3 lakhs – Rs. 4 lakhs a year, higher education in top reputed institutions across India is expensive and studies abroad being much more costing anywhere between Rs. 40 lakhs – Rs. 50 lakhs.
At the same time the average inflation rate (rise in costs) also needs to be taken into consideration while calculating the future costs of their education. Let’s take an example: A certain ABC school charges Rs. 25 lakhs today. 15 years from today, @ 8% annual inflation, fees would cost Rs. 79 lakhs. When you come to think about this amount as a whole, many people may not be financially ready to collect such amounts for their kids’ future needs.

Today’s Expenses Rs. 25,00,000

Average Inflation Rate 8%

Period of saving 15 years

How much amount needed after 15 years Rs. 79,00,000

Note: This is for illustrative purposes only. So, when you start planning for your child’s future, be realistic about assuming inflation as well.

Invest in Equity Mutual Funds Just by setting aside money for your kids’ education may not be enough. You need to let your money grow in the long-run. Beating inflation could involve investing in instruments which have a slightly higher risk. Equities can be one such asset class that may give you good returns in the long run. It is important to understand that equities are more of a long term investment option, since generally equities as an asset class is expected to give good returns over a long period of time. Inflation is one such factor that could possibly erode your hard earned savings if not channelized properly.

Start Early and Invest Regularly via Equity SIPs The most important thing that any parent needs to do is start saving early. Starting early gives you the benefit of the power of compounding and helps generate wealth out of your savings. If you haven’t yet invested in equity mutual funds, then now is a good time to do so via SIPs; not because of market levels but rather, because investing in equity mutual funds via SIPs helps you implement a healthy habit by way of discipline and develop a long-term approach thus letting you accomplish your long-term life goals like your children’s education.
Conclusion…

Our objective of this article is to help you plan and protect your child’s educational future so that he/she does not face any hurdles when it comes to paying fess to accomplish their dreams. While economic fluctuations are unpredictable, planning early can give a certain amount of immunity and serve as a financial cushion during crucial times.