The best gift a parent can provide to their child is education. It can empower the child with social and economic opportunities and succeed personally and professionally in life by pursing goals. For this reason, Indian parents consider education as investment rather than expenses.

With rising education costs and inflation, proper financial planning has become essential. Effective planning can make managing these expenses much smoother.

We bring effective strategies for planning investments by Indian parents, considering the demands of the Indian education system and economy.

Understanding the Costs of Education in India

The cost of education in India is skyrocketing from primary to higher education. For example,

• Private School Fees: Annual fees for private schools can range from ₹1 lakh to

₹3 lakhs.

• Coaching Classes: Preparing for competitive exams like JEE or NEET can cost between ₹1-2 lakhs per year.
• Higher Education: Professional courses like engineering, medicine, or MBA courses could range from ₹20 lakhs to ₹1 crore at institutes.

The current education inflation in India is around 10-12 percent per year, and is much above general rates of inflation. For example, if a particular degree today costs ₹10 lakh, then in another 15 years, its cost could shoot up to around ₹25-30 lakh. Thereby, future  expenses one may plan well with proper financial instruments.

The Importance of Starting Early Investment

Planning for your child’s education expenses from an early age makes it simpler to

manage your finances. It also helps compounding, wherein your investments grow faster as time passes, and starting early makes this daunting task simpler.

For example, starting a SIP when your child is three years old can grow savings substantially. Investing ₹5,000 per month could result in ₹25-30 lakhs by the time your child is ready for college, assuming a 12% annual return. A well-timed plan establishes a sound financial base for your child’s future.

Key Steps to Plan Your Child’s Education Fund:

Education planning is a mandatory process for securing your child’s future. If you take the right financial steps in advance, the burden of paying for your children’s education will diminish as you grow older.Below are the few steps to be followed:

1. Set clear goals: Consider the likeable career options for your child’s education. Interests may change, but having an estimate helps understand future costs.
2. Inflation: Education costs increase due to the effects of inflation with time. While planning, one should take the benefits of online education cost calculators or consult experts to determine the cost for education goal.
3. Invest in the Right Options: Invest in diversified options to meet specific goals. Some of the options are:
   • Equity Mutual Funds: Best for long-term goals with returns of 10-12%.
   • Public Provident Fund: Safe, tax-saving investments with returns of 7-8%.
   • Sukanya Samriddhi Yojana: High returns and tax benefits for daughters.
   • Fixed Deposits and Recurring Deposits: Safe returns for conservative investors.
   • Child Insurance Plans: Investment and insurance combined for emergencies.
   • Gold Investments: ETFs or gold bonds as a hedge against inflation.
4. Emergency Fund: Save money to cover 6 to 12 months of expenses for unexpected circumstances, ensuring education funds remain intact.
5. Insuring your Plan : Life and health insurance help safeguard the family. Your absence would indicate that any existing education funds are secured, but also, a comprehensive insurance protection plan will cover your uncertain life.
6. Diversification of Wealth Portfolio: Invest equally in mutual fund, debt, gold, and government schemes to maintain diversified risk and consistent growth.
7. Periodically Review Your Plan: Career planning has to be done smartly by tracking investments every year to remain on course. As education is near, transfer funds to

safer avenues like fixed deposits or debt funds.

8. Stay Consistent and Disciplined: Timely payments, correct tax filing, and constant search for better investment options ensure the plan runs as expected.

Mistakes to Avoid in Education Planning

These pitfalls help you to make informed and effective choices. Here are a few things to be followed:

1. Effect of Starting Late: Compounding can be fully enjoyed by saving.
2. Ignoring Inflation: An education fund should be based on inflation to meet expenses in the future.
3. Total Dependency on Education Loans: Education loans cannot be the only safety back-up as it puts excessive pressure on repayment.
4. Completely Ignoring Emergency Arrangement: Unexpected events can even destroy plans without insurance or any emergency fund.
5. Overlooked Tax Benefits: All tax benefits from investment instruments like PPF and SSY should be availed.

How Indian Parents Can Stay Ahead

Indian parents face the challenge of managing rising education costs while supporting their children’s studies. By planning, saving, and investing wisely, they can effectively build the funds needed within a set timeframe to secure their children’s educational

future.

Savings and investing for education:

1. Beginning small but maintaining a consistent savings pattern even with low savings.
2. Consideration of Mutual Funds, Sukanya Samriddhi Yojana, or insurance plans designed specifically for children.
3. Consultation with experts to build a diversified portfolio that provides both return and security.

This education investment always generates lifelong returns that never ensure that financial bottleneck hinders the road to success for your child. “An investment in

knowledge pays the best interest,” so start planning smartly for your child’s future.

By  Invest4edu- an education planning platform