December 6, 2012

Child Education Current Cost Vs Future Cost-Which scares you more?

Recently I saw an article in English daily, which shares the status of the parents when it comes to paying their kid’s yearly fees. Parents are ready to pause their EMIs few months for the sake of paying their kid’s yearly fees. Reason is, parents can’t compromise when it comes to the cost of kid’s education, especially with such a mad rush to get admission of their kid’s in branded school (remember not in quality school).

Motivation to this post is one of my client’s answer to few of questions related to his child’s education planning. He is more scary about current yearly payment rather than the future cost like kid’s Engg or Medical education expenses. I asked what expected raise he quote then he straight away said 10%.

Now with the current education cost itself raising with approximate inflation of around 10% then what about your kid’s higher education cost which will be 12 to 15 years away?
Another thing to worry for is, education inflation itself is around 10% then where you will invest for your kid’s future where you can easily beat the education inflation?

So how to prepare these two costs effectively? Answer lies in a well pre-planning to be in a safer side.

Current Education Costs-As I told above it is now a trend of around 10% inflation on your kid’s current education, it requires a well advanced plan starting from the year in advance. So to beat the inflation of around 10% within a short span of 1-2 years means you have two options. One is either you need to be ready to cough more investment to go safer or cough less and take more risk to meet that education goal. But in my view when your goals are near then it is not worth to take risk. Hence play safe by investing more for these yearly expenses. Products may be like Bank RDs or Debt Funds.

Future Education Costs-As your future education cost of your kid may be more than 10 years you can take risk and play with asset class like equity. But again in my view even 10% inflation consideration also will not suffice to meet the education cost. Hence start in advance and look for equity products like mutual funds to fetch a good return on your investment. Otherwise again you may be in the same condition where you may face now with payment towards your yearly education costs. Gone are the days when parents used to think about education cost when their kid’s actually clears 10th Standard. So start early is the mantra you need to follow to meet this goal.

Nowadays raising your child means coping with yearly expenses plus planning for kid’s future education or marriage. Hence planning for both makes sense rather than concentrating only on higher education or marriage costs. Hope this post may be an eye opener for parents 🙂

4 Comments

  1. Hey Basu, I am fan of your articals. I had started investment as per your articals. On this 11 oct god blessd me son. I am thinking to take policy for him. Please suggest proper child policy which help him for his eduvation.

    Reply
    • Dinesh-Congrats 🙂 But Policy for kid? Stay way !!! Instead buy term insurance in your name and start investing in other products like PPF or Mutual Funds based on your requirement.

      Reply
  2. Dear Sir,

    Can you please suggest what are the best mutual fund or other investment avenue for salaried employee to start investing for the child education and marriage. Term will be more than 12 years.

    I am interested in investing 3k-5k/month for my son future expense both education and marriage.

    Thanks
    Shekhar

    Reply

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