Recently I happen to attend Convocation Ceremony of my son at Bennet University, Noida. Like thousands of other parents present in the ceremony, we as parents were too excited about the moments to see our worthy son walk on to the stage to get his degree.
During whole of the event, I found one thing to be very common “Whatever region of the country we belong to, which ever city or village we come from, our aspirations as parents remain the same.” As per my habit, I was digging out from other known parents on how they felt, what was their thought process …..Trust me, we were all on same page and on same platform having same kind of feeling…..after all we are all human beings.
While sitting there, I did some maths & realized that for a 2003 born son, who has gone to school for 15 years + 4 Years in University, we have spent close to about 47 Lakh (on Schhol/College fee + Tution Fee), cost of Travel + Uniforms + Books + Laptops + Tab + Picnics not included.
Why I am sharing all this, am I scaring someone, definitely not. As a Financial Professional, all I am saying is, as parents we need to be well prepared. When my son was born in 2003, all we had visualized was to create an Education Fund worth Rs. 12-15 Lakh but we ended up spending much above 50 lakhs (only till Graduation), he is yet to figure out for his Masters. The amount spent is whopping 3 times to what we had visualized 21 years ago.
Planning for your child’s education is one of the most important financial decisions you’ll make, given that recent decades have seen maximum Inflation in Education Sector. Earlier, only Engineering or Medical used to be few choices with every family, but now the choices are far more in fields like Aviation, Law, Management, Bio Technology, Artificial Intelligence, Journalism, Interior Designing and so on.
Even attraction for foreign universities after 12th is on rise and if your Son/Daughter is opting to go abroad, multiply the budget by 2 to support Her/His study abroad aspirations.
It’s important that all young parents in age group of 30-40 yrs having children of 1-10 years age should sit down and seriously think of creating an adequate Children Education Fund considering all seen as well as unforeseen situations.
Few steps to consider
- Level of Education – Do you envision your child pursuing a bachelor’s, master’s, or doctoral degree?
- Type of Institution – Will they attend a public university, private college, or perhaps a specialized institution?
- Field of Study – Are there any specific programs or fields that are particularly expensive (Medical – Aviation) etc
Estimate Future Education Costs
Likely City of study after 10th, Standard of Caoching after 12th etc
- Tuition Fees – Research the current costs of your desired institutions and factor in potential inflation over time.
- Living Expenses – Consider accommodation, food, transportation, and other living costs. Travel Expenses etc
- Other Expenses – Include Books, tab, laptop, other tech instruments and potential study abroad programs.
- Calculate the number of years until your child reaches the desired education stage. This will help you determine the investment timeframe.
- Separate your child’s education savings from other financial goals. This will help you stay disciplined and avoid using the funds for other purposes.
- Consult with a financial advisor: They can help you select investments that align with your risk tolerance and time horizon.
- The earlier you start, the more time your investments have to grow. Even small, consistent contributions can make a significant difference over time.
- Automate your contributions – Set up automatic transfers to your education fund to ensure consistent savings with the help of ECS and OTM Creation.
- Regularly review your progress and make adjustments as needed. This may include rebalancing your investments or increasing your contribution amounts.
- Involve your child – Talk to your child about their educational goals and the importance of saving for the future.
- Choose equities in a Systematic & Disciplined way to beat Inflation and get market linked returns. Mutual Fund SIP becomes a preferred option for Aspiring Parents as it offers Easy on Pocket approach backed with Flexibility as well as Transparent Returns that are very Tax Efficient.
- If you have a Child aged 2 – 5 years, don’t feel surprised if Education Fund requirement for Him/Her at the age of 18 years exceeds min 1- 1.50 Crore plus, depending on Type of Degree / Standard of University / Place of Study etc.
Considering that you need an Education Fund of Rs. 1 Crore for a child aged 3 years to be used from 18 – 23 years (Graduation + Masters), This means You need to have crystal clear understanding that Your Goal is Child Higher Education Fund and time frame to reach this Goal is 15 Years.
Once you have monthly earning in Hand, first priority is Household Expenses, your second priority should automatically become Child Education Fund and here comes your choice of Investment tools…..
To make it easier to understand the options to Invest is as good as choosing modes of transport to travel from say Delhi to Bangalore…..you can travel by your Own Car, Take a long route bus, Opt for an Express Train or take a flight. Depending upon your selected mode of travel, your travel time will range from 30 Hours – 3 Hours.
In a same way, your hard earned money grows at the pace you decide. If you want to accumulate an Education Fund of say 1 Crore in 15 years and you look forward to opt for monthly discipline, here is how this 1 Crore will happen
Start Putting Rs. 44843 in Saving Account/PM
Start Putting Rs. 38554 in Insurance Policy/PM
Contribute Rs. 29355 in Sukanya Samridhi/PM
Contribute Rs. 31092 to DSOP/PPF each month
Start a SIP of Rs. 14774* in SBI Magnum Children Benefit Fund- Investment Plan (This calculation is at a moderate expected return)
You need to decide what suits your Pocket. Educating a Child means building a legacy for your future generations, you dont have option to take chance or go wrong in this aspect. I suggest, having an Advisor to discuss creating Child Education Fund with pure perfection.
Thumb Rule remains, Start Early – Stay Disciplined – Keep adding Lumsum Regularly.
I am sure my personal experience of attending my son’s Convocations helps you in some way to visualize you sitting in a big gathering some day & waiting for your child to walk on the stage to get Her/His degree giving you a satisfaction of being a Proud as well as Smart Father. I leave you here with 3 simple choices.
Start Early – Stay Disciplined- Choose your options wisely.
Happy Investing!!!
Kamal K Sharma is a Finacial Professional & an Authror to the best seller The Piggy Bank Billionaire book. Please write back at 9501017769.kamal@gmail.com
