Education is a gift for life! Children exposed to quality education get a platform to crack their potential and realize their dreams. It prepares a strong ground for them to lead an independent and self-sufficient life. So, nothing other than quality education could be the best gift to kids, from parents.
However, given the sharp rise in the cost of education, it is not that easy to offer quality education for your dear one. You first have to seek answers for many questions like, ‘How much money is needed to pursue engineering degree after 15 years from now?’, ‘Am I prepared to meet the financial needs of my child’s higher education?’, and so on. If you too are interested in answers, read this post at ArthaYantra.
Insight Into Rising Cost Of Education In India
The rising cost of education is the major concern for most parents in India. An exceptional hike is seen in the education fees year by year. The below table reflects the numbers from NSSO survey on education costs across the states in India.
The table clearly indicates the huge spike within a seven-year time frame. If the fee continues to rise by an average 20% every year, the two-year management course may cost around 95 lakh rupees in 2025. A four-year engineering course costing 8 lakh rupees today is expected to rise to 17 lakh rupees in another 8 years’ time.
Today the inflation stands at 10% and the education fees increase year on year, above and beyond the inflation rate. Thus, it is a clear wake-up call for parents to be prepared to meet the costly, future education needs. If not prepared, you will not be able to accumulate enough funds to meet the requirements.
Are You Prepared For Your Child’s Education?
The statistics may seem scary, but do not worry! You can achieve your goal if you take the right path. The key lies in starting early savings for your kid’s education. Set it as a long-term financial goal and keep contributing towards it.
Let’s glance through the available options to invest for child education? Select the best one that helps you give a good shape to your little one’s future.
1. Recurring or Term Deposits:
Recurring deposits and term deposits (fixed deposits) are one of the most popular traditional methods of investing, offered by banks, post offices or private agencies. They are time-bound and come with a pre-determined rate of interest.
2. Real Estate:
People consider investing in real estate as a form of investment. They buy a property (agricultural, commercial and residential) and aim to sell when the need arises.
3. Child Plans (Insurance):
Life insurance companies offer child plans designed for kids. Most of them are money back plans, which offer periodical payments for important stages of child’s life. They also cover life insurance.
4. Government Schemes
These are fixed income savings schemes offered by the government. They need investments for certain period of time.
5. Mutual Funds:
Mutual funds have the potential to offer better returns compared to child plans or any other investments. High returns would help you meet the expected cost of education, years later. Additionally, they are more tax efficient. There is no limit to the investments and the periodical or fixed investments options are always available. They give access to every sector of the Indian market, allowing for a diversified portfolio. Through a diversified portfolio, you can sustain the ups and down of the market.
A comparative study of rate of returns of the above-cited investments
Return rates vary for each option but it is not advisable to pick one by just looking at the rates. The below table further evaluates the pros and cons of each available option for child plan.
With so many available options, it is not always easy to take the right decision. Just tallying the available categories based on the returns range or benefits may not be enough!
Even, going for the one with decent returns and safety for the capital does not mean that you are all set to meet the future costs. Rather, it is essential to ensure that the core objective is met, which means returns should yield the expected future education cost.
Apart from building the amount for your child’s education, it is important that you are well-prepared for other expected or unexpected costs like medical expenses, family crisis or emergencies. Else, there is a big chance for you to deplete your child education investment, thereby leaving you nowhere with your goal!
Thus, a detailed research and analysis on the each available option for child plan would come as a savior to secure your dear one’s future! The clear analysis and unbiased online advice from ArthaYantra would help you achieve your long-term financial goals, with ease!
The sooner you start investing for child education, the better it is!