SOURCE : NEW18 NEWS
Last Updated:January 11, 2025, 15:16 IST
With education costs increasing at an alarming rate, particularly for higher studies and overseas programmes, proactive financial planning is essential.
Planning for your child’s education has become one of the most critical aspects of financial management in India. With education costs increasing at an alarming rate, particularly for higher studies and overseas programmes, proactive financial planning is essential. The importance of education in shaping your child’s future career and personal growth cannot be overstated, making it imperative for parents to adopt a strategic approach.
Here’s a guide for you on effective strategies and tools to save for your child’s education, keeping in mind the rising costs in India.
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Understanding the Rising Costs of Education in India
Education costs in India have been on an upward trajectory over the past decade. From primary schooling to advanced degrees, expenses such as tuition fees, extracurricular activities, books, and technology have increased significantly. For instance:
1. School Education: Private schools charge fees that range from Rs 50,000 to Rs 3,00,000 annually, depending on their infrastructure and reputation.
2. Higher Education in India: Courses like engineering, medicine, and management can cost Rs 10,00,000 to Rs 25,00,000 or higher for the entire programme.
3. Overseas Education: The cost of studying abroad for popular courses can range from Rs 50,00,000 to over Rs 1 crore, depending on the country and institution.
These rising costs are driven by inflation, infrastructure upgrades, and the growing demand for quality education. To ensure your child receives the best opportunities, starting early and planning well is essential.
Steps to Save for Your Child’s Education
1. Set Clear Goals
Estimate Future Costs: Use online education cost calculators or financial planners to estimate the expenses for your child’s future education, accounting for inflation. For example, if a program costs ₹10 lakhs today, with an average inflation rate of 8%, it may cost over ₹21 lakhs in 10 years.
Define Milestones: Decide how much you’ll need at different stages, such as school, undergraduate studies, and postgraduate studies.
2. Start Early
The earlier you start saving, the more time your investments have to grow through the power of compounding. A delay of even a few years can significantly impact your corpus.
3. Choose the Right Investment Options
Sukanya Samriddhi Yojana (SSY): Ideal for a girl child, offering tax benefits under Section 80C with competitive interest rates.
Mutual Funds: Equity mutual funds are a great choice for long-term goals, as they provide higher returns compared to traditional savings schemes.
Public Provident Fund (PPF): A safe and tax-free investment option with a long lock-in period, suitable for conservative investors.
Fixed Deposits: Traditional, low-risk savings options, although they may not keep up with inflation.
Education-Specific Plans: Child education plans offered by insurance companies combine savings and insurance.
4. Create a Diversified Portfolio
Allocate your investments across different asset classes (equity, debt, gold, etc.) based on your risk appetite and financial goals. For long-term goals like education, equity investments often deliver better returns.
5. Set Up a Dedicated Education Fund
Open a separate account or fund specifically for your child’s education. This helps you track and secure funds exclusively for this purpose, avoiding any diversions.
6. Monitor and Adjust Your Plan
Periodically review your investment portfolio to ensure it aligns with your financial goals. Make adjustments based on market conditions, inflation, and any changes in your child’s educational aspirations.
7. Leverage Education Loans for Higher Education
While savings should be the primary source, education loans can supplement funding for higher education. They offer tax benefits under Section 80E and ease the financial burden.
Tools and Resources for Effective Planning
1. Education Cost Calculators: Online tools to estimate future education costs based on inflation.
2. Financial Advisors: Professionals who can guide you in creating a robust education savings plan.
3. Investment Tracking Apps: Apps like Groww, Zerodha, or Paytm Money can help you monitor and manage your investments.
4. Scholarship Opportunities: Research scholarships and grants to reduce the financial burden.
Tax Benefits to Consider
To optimise your savings, take advantage of tax benefits under various sections of the Income Tax Act:
Section 80C: Investments in PPF, SSY, and tuition fees for children are eligible for deductions up to Rs 1.5 lakhs.
Section 80E: Tax deduction on the interest paid on education loans.
Mistakes to Avoid
1. Delaying the Process: Procrastination can lead to a shortfall in your corpus due to the rising costs and loss of compounding benefits.
2. Relying Solely on Traditional Savings: Low-return investments like fixed deposits may not keep pace with inflation.
3. Not Accounting for Inflation: Failing to consider inflation can leave you financially unprepared.
4. Lack of Contingency Planning: Not having backup options, like insurance or an emergency fund, can derail your plans.
Conclusion
Saving for your child’s education is a long-term commitment that requires discipline, planning, and the right financial tools. By starting early, setting clear goals, and investing wisely, you can ensure your child’s educational aspirations are met without compromising your financial stability.
Education is one of the greatest gifts you can give your child. With rising costs in India, it is more important than ever to plan and save diligently. Take the first step today to secure a brighter future for your child.