Planning for education is now more crucial than ever to give children a real edge. Whether it’s finding quality schooling, specialized courses, or global higher education, a solid financial strategy ensures your child is prepared for a future where adaptability and innovation matter.
Importance of education planning
Parents today are strategizing their child’s entire educational journey ahead of time. From early childhood programmes to prestigious universities (IITs, IIMs, or even Ivy League colleges), they’re aiming for academic excellence that opens doors to global opportunities.
But along with educational aspirations come rising costs. Tuition fees, extracurriculars, international programmes, and advanced courses require careful financial preparation. Without a proper plan, even the most talented students may miss out on life-changing opportunities.
Building a plan
Whether you’re opting for traditional schooling or alternative learning methods, the key is to choose institutions that focus on creativity and problem-solving skills, ensuring their holistic development. Therefore, education planning requires a long-term financial strategy.
Starting as soon as your child enters preschool gives you a financial advantage. This includes creating an education fund for all stages of education, i.e., preschool, primary and secondary schooling, and higher education.
Early planning means you benefit from compounding returns, reduce last-minute financial stress, and secure the resources needed for higher education.
Guide to financial planning for your child’s education
Step 1 is to set the goal. Know what kind of education you would like to plan for your kid and what the cost will be today for that education. For example, today, the entire cost of medical education, including PG+UG, can go up to ₹2 crore.
Step 2 is to calculate the future cost by considering the inflation. Normal inflation in India is 7%, but education inflation has gone up to 10% in the last few years. For example, if your child’s age today is two years, a higher education corpus will be required starting from 17 years of age, i.e., after 15 years, inflation-adjusted. The total corpus required for higher education, inflation-adjusted, will be around ₹7.80 crore.
Step 3 is to decide on monthly savings. This will largely depend on parents’ financial situation and investment risk profile. You can use a systematic investment plan calculator to calculate the amount of investment needed every month (8% is considered a discount rate). To achieve this future corpus in 15 years, you will need to invest ₹1.56 lakh per month.
Another thing to note is to consider taking a loan if the corpus is insufficient.
Step 4 is to choose the right investment avenue. Your investment strategy depends upon the investment time horizon. If time to the goal is over years, invest in mutual funds (equity-based), or 5-10 years, invest in balanced mutual funds, or less than five years, invest in debt funds, fixed deposits, or child plans with capital safety.
Financial learning for kids
It is also important to educate kids on financial aspects of education and make them a part of the process. With the emergence of digital tools and platforms, students have access to interactive and engaging resources that make financial education more accessible than ever.
Teach them how to budget money for various things such as saving, spending and giving away. Provide them with a small allowance and offer guidance on how to manage it. Doing so will teach them the value of budgeting and develop financial discipline. Involve them in comparing prices during shopping or planning a family trip. Let them create a budget or plan expenses.
Scholarships
Many parents miss out on scholarships and government schemes that ease financial burdens. Private and international scholarships encourage your child to apply for merit-based scholarships, especially for higher education abroad. Opt for education loans, if necessary, that offer flexible repayment terms to manage large expenses.
Final thoughts
Finally, the best possible educational opportunities are achieved in India through careful planning and timely action. Parents can be of great service to their children through financial awareness, all-round development, and continued research into educational opportunities.
Views are personal.
The author is co-founder and chief executive of Finnovate Financial Services Pvt Ltd.
