Roadmap to Planning Your Child’s Education

Preparing your child for college in the current landscape necessitates meticulous planning, strategic decision-making, and judicious investments in appropriate funds and instruments. Such a venture demands a well-constructed timeline, coupled with regular reviews and recalculations along the way. Success in this endeavor hinges on the implementation of a foresighted plan.

Navigating the various milestones essential for shaping your child’s future requires a dedicated focus on planning for their education. By doing so, you not only ensure their access to quality learning experiences but also pave the way for a secure and fulfilling journey into adulthood.

In this blog, we’ll explore a comprehensive roadmap to guide you through the process of planning your child’s education.

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Planning for your child’s future – An Illustration

Last week Sam heard his colleague, Alok, complain, about how difficult and expensive it was to get his child admitted to a good school. Alok and his wife had spent the past few months running from pillar to post to get their 3-year-old accepted at a good school. This got Sam, himself the proud father of a new born boy, wondering how much money it would take to get his son educated not just in a decent school but also through college and even perhaps post-graduation.

Sam is not alone in worrying about this. Most parents these days worry about the rising cost of education from Primary School itself, and that’s just the beginning. Higher education is expensive, and it’s only going to get more expensive. Tuition costs are rising at a rate significantly higher than the inflation rate. In fact, on average, the cost of college doubles about every nine years. This means that for a child born today, once they enter college, the college costs will be nearly four times what they are now.

So, the first question that most parents have is – How much do I need to save for my child’s future Higher Education? The follow-up question is – How do I save enough?

How much do you need to save for your child’s higher education?

As his son is just born, Sam doesn’t know his future career choice.  However, that doesn’t mean he shouldn’t begin saving for his higher education. He can still plan and set a goal by estimating his son’s future education cost based on the current education cost of various available opportunities and the expected inflation rate. Every parent can and should follow this approach.

To estimate the size of the investment corpus required, let’s look at the cost of some popular courses in India at top institutes and assess their future cost 18 years from now, assuming inflation at 7% p.a.

Assuming an inflation rate of 7% p.a.

Here, we have considered the course fees for top colleges in India. The cost would be significantly higher (almost 4 times) if your education plan includes studying at a reputed foreign university.

The above table would give Sam an estimate of how much he will need to save for his child’s future education. On the lower side, he will need a corpus of around Rs. 17 lakhs, while on the higher side, the amount is as high as Rs. 1.2 crore. You should also remember that the structure of education fees varies from college to college. So, you should plan for a bit extra in advance to cover costs such as Hostel/Mess Expenses, Study Tour Expenses, Laptop, and other Essential study aids, etc.

Based on these considerations, for Sam a corpus of Rs. 1.9 crore (assuming Engineering + MBA as the desired career) should be sufficient to ensure that he has enough funds in the future to finance his son’s education no matter what his future educational choice is. This is a substantial amount, and no matter how big his pay check is, he will need to create a suitable investment plan for his child’s higher studies and grow his money over time to reach this investment target.

How Much Do You Need to Invest Every Month?

Start with child education planning as early as you can and invest the right amount in the right investment products to accumulate the desired corpus to fulfil all your child’s aspirations.

For Sam with a target corpus of Rs. 1.9 crore in the next 18 years and further assuming that his expected equity mutual fund investment CAGR is 12%, the monthly SIP amount he needs to achieve this target will be Rs 24,825.