Providing quality education is a top priority for most Indian parents, as it lays the foundation for their child’s future success. However, the rising costs of higher education in India can make funding your child’s education seem like an uphill battle.
The good news is that with proper planning and disciplined saving, this important goal is achievable. Let us explore some key strategies to help you build a robust education fund for your child’s education in India.
Strategy 1: Start saving early
The earlier you start saving for your child’s education, the more time your money has to grow through the power of compounding. Even modest contributions made consistently from the time your child is born can accumulate significantly over the years. Consider setting up an automatic transfer from your salary or bank account into a dedicated education savings account to make saving for this goal a habit.
Strategy 2: Explore mutual fund options
Mutual fund is an investment option that can help you plan for your child’s education. Through diversified mutual funds, there is exposure to the equity market and simultaneously diversify the risks of investing in an individual stock. Take advantage of tax-saving investment options like the Equity Linked Savings Scheme (ELSS) and the Public Provident Fund (PPF), which offer tax benefits and can be used for educational expenses.
Additionally, consider investing in the Sukanya Samriddhi Yojana, a government-backed scheme specifically designed for the girl child’s education and marriage expenses.
Strategy 3: Leverage scholarships and education loans
While scholarships are not guaranteed, they can significantly reduce the out-of-pocket costs of education. Encourage your child to excel academically and participate in extracurricular activities that can increase their chances of qualifying for merit-based scholarships offered by the government, educational institutions, and private organisations.
Additionally, explore education loans with favourable interest rates and repayment terms from banks and non-banking financial companies (NBFCs).
Strategy 4: Consider cost-effective options
India offers a range of quality educational institutions at varying cost levels. While prestigious institutions like the Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs) can be expensive, consider more affordable options such as state universities, private colleges, or even online degree programs.
Additionally, encourage your child to explore vocational courses or diploma programs, which can be a cost-effective way to gain practical skills and secure employment.
Strategy 5: Involve your child in the process
As your child grows older, involve them in the process of planning and saving for their education. Teach them the importance of budgeting, setting financial goals, and contributing to their own education fund through part-time jobs or internships. This will not only help offset costs but also instill valuable financial literacy skills.
Imagine you have a newborn, and you want to plan for their future engineering education expenses. Let’s say you decide to save for a four-year undergraduate degree from a top private engineering college. Based on current costs and projected increases, you estimate that you’ll need around Rs 1.5 crore by the time your child turns 18.
Suppose you start investing immediately and contribute Rs 10,000 per month in a diversified mutual fund earning an average annual return of 12%. In that case, you will accumulate approximately Rs 76 lakh by the time your child is ready for college. The following table illustrates the growth of your investment over the years:
| Age of Child | Monthly Contribution | Annual Return | Total Investment |
| 0 | Rs 10,000 | 12% | Rs 1,12,000 |
| 5 | Rs 10,000 | 12% | Rs 2,40,000 |
| 10 | Rs 10,000 | 12% | Rs 12,00,000 |
| 15 | Rs 10,000 | 12% | Rs 18,00,000 |
| 18 | Rs 10,000 | 12% | Rs 21,60,000 (≈ Rs 76 lakh) |
While Rs 76 lakh is a significant amount, it would only cover about 50% of the projected Rs 1.5 crore cost for a top private engineering college.
To bridge the gap, you could explore additional strategies, such as:
- Increasing your monthly contributions to Rs 15,000 would put you on track to accumulate around Rs 1.12 crore by age 18.
- Encouraging your child to apply for scholarships and education loans to reduce out-of-pocket costs.
- Consider a more affordable state university or a distance learning program for the first two years before transferring to a top private college.
By combining these strategies and adjusting your plan as needed, you can increase your chances of successfully funding your child’s education in India and providing them with the opportunities they deserve.
Funding your child’s education is a long-term commitment that requires careful planning and disciplined saving. By starting early, taking advantage of tax-saving investment options, exploring scholarships and education loans, and involving your child in the process, you can increase your chances of success in this important endeavour.
