Money, Money, Money: Planning for your Child’s Education

Written By

Bindu Bhat

Lifestyle.Finance.Education plan.21.1.2016-04 Loading

“Planning is bringing the future into the present

So that you can do something about it now…”

Alan Lakein

Glad to have you back! This installment of the series is about getting our financial planning right when we choose to become parents.

In the previous article, we discussed the financial implications for early child care. Continuing from there, the next step is to plan for your child’s education, so that he/she gets the best education that you can provide for your loved one.  Child education can be divided broadly into three categories:

  • Early schooling — from play school to prep school
  • Formal schooling — primary to senior secondary school
  • College education — under graduation program

Let’s consider the play school and school part first.

Indicative costs per child:

  • Play schools can vary from Rs. 60 k to Rs.1.2 lacs per year depending on the kind of facilities, location and infrastructure provided. Some of the play schools may have a tie-up with formal schools in which case the admission to the formal school will become easy.
  • Formal schools usually have one-time admission fee ranging up to Rs.2 lacs and tuition fees up to Rs.3.5 lacs. The IB (International Baccaularette) and IGCSE, Cambridge curriculum tend to have the higher fee structure as compared to the others.

The key factors that will play an important role in your decision are:

  • Proximity to your home — can you walk down with your little one to school or would you need to avail of a school transport facility
  • Facilities and infrastructure, as well as the teaching faculty of the school
  • The school curriculum: options available range from the State board, CBSE, ICSE, IGCSE and the IB
  • Some of the other important factors that may impact your decision are Day care (if required) and after school activities including sports, fine arts, music, dance, and self-defense.

While, the transport cost will be part of the school fees, additional extra-curricular activities will be an additional cost. While these expenses may sound a bit scary, it is definitely possible to meet these needs by planning and implementing your plan.

Action steps for you:

  1. Start a monthly investment mode – use a recurring deposit or a debt mutual fund as options to build up.

For e.g. If the annual fees budget for the selected school looks to be in the range of Rs.1.5 lacs from the early school phase, start a systematic monthly investment SIP of Rs.10,000/- right from the birth of your child and continue it right through the schooling years.

Also, do plan to increase the SIP amount by at least Rs.5000 every 2 years.

  1. Start a separate investment fund for your child’s graduation program.

While planning for the graduation program, we need to keep in mind the impact of inflation and plan accordingly.

Here’s a calculation to understand this better:

Let’s assume your child’s graduation is in 2033.   

Illustration: If today’s 4 year under graduation engineering program costs Rs.5 lacs per year, the total program cost is Rs.20 lacs. Let’s assume a 10% education inflation, 17 years from now in 2033, this inflation adjusted cost could be about Rs.1 Cr.

Start time Investment period SIP required per month Education fund ready
Child is new born 17 years Rs.12,000  

Rs. 1 Cr

Child is 5 years 12 years Rs.27,000
Child is 10 years 7 years Rs.70,000
Child is 15 years 2 years Rs.379,000

The early bird does get the worm! And delay is very expensive.

For any money-related questions or further advice on  how to plan this out, feel free to contact me on bhat.bindu@gmail.com.

Add this to your list of resolutions for 2016: Do make your money work smarter and harder for YOU!

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ABOUT THE AUTHOR

A happy mother-cum-financial-planner-cum educator; community volunteer, avid traveller and history buff; Bindu loves it all. Along with being a mom to her 12 year old, Bindu is also discovering more sides to herself after crossing the '40' milestone and is enjoying the journey thoroughly. Bindu believes that working as a Financial planner gives her the fabulous opportunity of seeing people make positive changes in their money habits. And to catch them young, she conducts financial literacy programs at schools and communities. She's a Mathematics grad and Finance post-grad from Amchi Mumbai, worked with a banking group and a Hyderabad based start up, before finding her niche as a Financial Planner, based in Hyderabad.

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