Are you saving enough for your child’s education?
“My son has got a rank of 2400 in JEE advance. He’ll get into one of the IITs. We are now deciding on the branch for Engineering,” read a WhatsApp message that I received from a friend last month.
I called up my friend to congratulate her on her son’s result. As she spoke, I could make out the sense of deep satisfaction in her tone. I could easily relate to her feeling as I myself had felt so relieved when my daughter got admission into an engineering college. For a parent, it is a big respite when your child gets into a good college – a coveted one at that.
One of the goals that most Indian parents have for their children is that they build successful careers in their adult life. Since education is the first step towards a successful career, so when it comes to education, there are no cutting corners.
The struggle for good education begins with securing the child’s admission in a good school of choice. This is followed by the struggle to get into a good college for an undergraduate course. Engineering, medical and law aspirants start preparing for the entrance exam while they are still in school.
Coaching institutes that prepare students for these entrance exam charge between Rs 80,000 – Rs 1 Lakh a year. Cracking these entrance exams is tough and getting admission into a premier university becomes a bigger challenge. If the child manages to get into a college of repute, one has to be ready with the finances.
Education is an area that is highly affected by inflation. Between 2007 and 2017, the average annual education cost (from primary level to post graduation and above) has shot up heavily.
Higher education costs have the highest inflation rates
The decade from 2007 – 2017 has seen an eight-fold increase in the tuition fee in the IITs (India Institute of Technology). Whereas in 2007, the total tuition fee for doing a graduate course in Engineering from an IIT amounted to Rs 1 Lakh, today the same course costs a fee of Rs 8 Lakhs. With the hostel rent, mess charges etc. added, the total cost works out to be around Rs 10L or more for an Engineering course in a government college. The cost of doing engineering from a private engineering college works out to a minimum of Rs 15 – 16 Lakhs.
Private medical colleges are much more expensive. The total cost for a 5-year MBBS degree from a private medical college ranges from Rs 25 to Rs 60 Lakhs or more. The fee increases almost every year. Similarly, different law colleges carry different fee structures. Doing a five year Law course from a National Law University (NLU) costs around Rs 2 Lakhs per annum.
The post graduate courses have become expensive too. For a Postgraduate two-year management program in IIM A, the fee has risen more than 400% from Rs 4.3 Lakhs in 2007 to Rs 21Lakhs in 2017-2018. Other B-Schools have followed the suit. If the fee further continues to rise even by 15% per year, the cost of doing a two management course in 2027, will be roughly around Rs 1 crore.
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Since good education is becoming increasingly expensive, one needs to plan wisely. A proper long-term investment plan is needed to tackle the problems of increasing cost of education. The heading link talks about the financial must-do’s to ensure a smooth welcome for the baby.
By investing some money regularly towards education planning, you can ensure that you are not short of funds when it’s time for your child to go to medical or business school or pursue any other line of education. Depending on the age of the child at the time when you start investing, you can select an appropriate investment option to save for your child’s education.
Needless to say that if you start investing early (say in your early thirties), the longer time horizon will have a higher compounding effect and fetch you better return that will help you to bear the expensive education cost. The earlier you start the better equipped you will be to pay for your child’s higher education.
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