Did you just pay your child’s monthly school fees and notice a slight increase in them? This will be true even if your child goes for higher education in college. According to the findings of an All India Survey published in The New Indian Express, education inflation is nearly 12%.
This incline in education costs leaves a dent in the financial planning for any family. Even if you choose a personal loan for holiday, you might wonder if you can finance education expenses with it.
Read on to understand the ways education costs impact financial planning.
The Bite of Sky High Tuition Fees on Budget
The growth in high-quality education comes with a catch. It’s the constantly increasing tuition fees. These costs can double at an interval of six years, depending upon inflation.
So, suppose the cost of an engineering degree in the present year (2024) is Rs. 10,00,000. Your son is in grade 8. The inflation is set at 6%, and your returns from investments is 12%. The estimated cost of getting the engineering degree will be Rs. 13,38,226. You will need to invest around Rs. 16,386 monthly to fund the education.
The Need for Saving a Lion’s Share of Your Income
Besides tuition fees, accommodation expenses, and miscellaneous fees also need to be paid. The bigger your savings account, the better it is. This is because, similar to tuition fees, the room and boarding charges also change yearly.
To combat the challenge of rising education costs, start saving at the earliest. Some good ways to do it include:
- Creating an emergency fund
- Changing your lifestyle
- Making it a habit to live below your means
Also, education gets costlier as the child’s education progresses. So, try to save more than the usual money from your monthly earnings after every six months or so. If, for example, you’ve been saving 10% of your income, increase it gradually by 3% at a set interval.
Early Investments Equals Major Victory
You may have been a wise investor before your grown-up child told you their college preference. Top-notch institutions for professional studies are completely opposite of cheap. A single look at their rising costs is enough to make even an experienced investor afraid.
To combat this fear, start investing frequently in a variety of assets. The earlier you start, the longer your time horizon will be. Explore the following asset options:
- Mutual funds
- Fixed Deposits
- Public Provident Fund
- Bonds
Time to Take a Stance Against That Debt
Savings and debt never shake hands. And when you’re thinking about education expenses, debt becomes a devil in your house. Naturally, in an inflation-prone economy, you cannot dream of making your child study in a great institute without eliminating debt.
Here are some tips to manage and put an end to that debt.
- Create a budget and stick to it.
- Pay more attention to saving.
- Focus on paying debts with high interest rates
- Track your bills and identify areas where they can be reduced
- Shorten the length of the loan you’ve taken
Conclusion
Exploding education costs impact every aspect of financial planning. Be it savings, investment, or debt reduction, they pose various hurdles in the achievement of financial goals. The key is to start analyzing the trends and plan accordingly. So you’ll be better prepared to fund your child’s education.
FAQs
- Why do education costs change over time?
Education costs change and increase because of the increased demand for it. This increased demand leads to infrastructure development and the need to maintain more staff. Many colleges also provide diverse support services for students’ benefit. It adds to the overall cost.
- How do I choose a good child plan to cover my child’s educational expenses?
Calculate the average amount you’ll need to fund the education. After that, find a plan that enables you to secure that amount in a specified timeframe. Plans that allow you to decide the payment frequency of the premium are most helpful. It’s also important to check the returns from it.
- What is a life cover for a child?
A life cover imparts financial protection to the child if any unfortunate incident occurs in their lives. It offers market-linked returns. Premiums of a live cover be paid monthly, half-yearly, or yearly.
- Which government schemes are beneficial for educating a girl child in a low-income family?
Many government schemes provide financial aid to a girl child from a low-income family. The top ones are the Balika Samriddhi Yojana, CBSE Udaan Scheme, and Sukanya Samriddhi Yojana.