An investment in knowledge pays the best interest – Benjamin Franklin
I studied in a government school where semi-annual fee was 57 rupees. Later on, I qualified to study at one of the IITs, considered the best engineering college in India. During those days (around 20 years ago) the total fee for the 4 year B.Tech program was well below 1 lacs. However, things have changed a lot since then. Standard of education in government schools has deteriorated. As a result, most parents don’t have any option but to put their kids in expensive private school. Now, the demand for quality education is a bit inelastic and hence schools are in a position to charge as much as they want. At a time when newspapers are full with statistics of job losses and low salary growth, fees are rising at a much faster rate every year. If you ask any parent with school going kids, education related expenses are probably the second biggest expenditure after monthly rent. In a city like Bangalore, average monthly school fee for a primary student will be in the range of 15000/month (including transportation). For premier schools, it could be 3 times more.
This is the scenario of primary school. Once your kid finishes 12th, the bigger headache of putting them in good graduate program appears. Competition is brutal with selection rate for most good engineering or medical institutes is in the range of 1 to 1.5%. Now, I know a brilliant student who has been appearing medical entrance tests. She appeared in NEET exam this year. Despite getting a percentile score of 99% and a rank of 13000 (among almost 13 lacs aspirants), it was difficult to get admission in a MBBS program. The fee in private medical colleges is anywhere between 10 to 20 lacs. If you look at MBA program fees, the fees are in the range of 20 lacs even in IIMs. Private institutes are insanely expensive.
Now, I feel it is a parent’s job to ensure that their kid’s get quality education. Education up to class 12th should be funded by your regular income. I will talk mainly about how to tackle the bigger requirement of the higher studies. This will require money and careful planning. Before going into more details about investments, it is a good idea to know how much it costs these days to study.
How much higher education will cost?
Future cost has been calculated using 6% education inflation.Above figures are based on publicly available information and might be different from actual cost.
How to plan for kid’s education?
As we know, choice of suitable investment instrument depends on how much time you have to meet your goals, how much money you want for the education and your risk tolerance. On an average the more time you have for your goal, the more flexibility we have in choosing the investment option. We will write another post with details on how to go about this. Subscribe to our weekly newsletter to get it in your email.
Disclaimer: The above content is just for information and should not be construed as an offer to buy or sell or recommendation. Contact your financial advisor for guidance on any investment related query.
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