Why do you need to save 10 years in advance for your child’s college?
A good college for your child is the end goal for every parent because it’s the stepping stone to a great career and life. Ideally, you need to save 10 years in advance for your child’s college but many parents make the mistake of thinking they have enough time.
Here’s why you need to start saving early and consistently for your child’s higher education to be financially independent in the future.
Increasing tuition fees
Do you know that the cost of education schooling, and college is going up by 10 -12% every year? Let’s say the annual fees in a private engineering college in 2022 stand at Rs. 6-7 lakhs. By 2027, this same one-year fee will be Rs. 27 lakhs, given the rate at which fees are being hiked. The standard rate of inflation does not apply to education and is almost always higher.
Increasing lifestyle cost
Changing lifestyle standards and greater disposal incomes mean parents don’t want their children to study in government institutes that at times have the insufficient infrastructure. So, when you start looking for a college for your child, you will naturally find yourself drawn to contemporary universities with fancy buildings, equipped with all kinds of learning and teaching technology everything that comes with an expensive price tag.
Especially as ICSE and international boards become increasingly accepted, the next step in a student’s academic career is a school that is comparable to global world-class educational institutes in terms of quality of education, opportunities, and facilities. When you plan to give your child the best of institutes, you must be ready for the financial demands that tag along.
Getting into good government colleges/universities was always challenging, but now it has become even more so with the growing numbers looking to pursue higher education. The intense competition at the govt universities has increased the demand for private universities that charge more than their government counterparts. This makes it necessary for parents to save up over time for the large fees that are required in private universities.
Similarly saving up for sending your child abroad comes with its own set of financial woes. You need to consider currency changes, the political and economic climate of both countries, and the average cost of living rather than just your child’s college fees.
How to save across 10 years?
- Overseas undergrad education in the best of universities can cost you close to a crore of rupees. Sure, at the outset this amount sounds daunting, but it is not. If you start putting away Rs. 9000 – 12000 per month over the next 10-15 years, you will be able to touch your target of creating an education corpus of Rs. 1 crore. Investing in Equities across a long-term horizon usually brings you an average return of 15-16%. This is further enhanced when you do not pull out your earnings on a regular basis.
- When you start early, you have the distinct advantage of the power of compounding. Your investment will grow and give you impressive returns over a long period.
- If you think you will start late and make-up as you go along, you are sadly mistaken. A shorter investment term means your money has lesser time to grow. Yet there are many financial instruments you can depend on to reach your goal, it’s always better to approach a professional or a financial advisor when you are considering a huge expense like higher education.
Saving 10 years in advance for your child’s college gives you a huge advantage. It can you manage your daily spending and take care of one of the most challenging spendings of your life. Don’t start saving blindly, get in touch with an expert to get a financial plan for your child’s unique goals.