Child Education Planner

What are the factors to consider while planning for your child’s education expenses?

Child education planning involves the consideration of multiple factors such as academic expenses, living cost and other financial factors. Starting early and staying disciplined in your investment journey can help achieve your financial goals with ease. Here are some of the key factors to be considered: 

1. Defining education objective 

• Level and stream of education :

  The level and stream of education play an important role in determining the cost. For example, an undergraduate degree usually costs more than post-graduation and engineering is usually more expensive than humanities as a stream of education.   

• Government or private education :

  Disparity in course fees between government and private institutes can be significant. For example, engineering from a state owned Government College will be cheaper than engineering from a private engineering college.   

• Education in aboard :

  Higher tuition, living cost, and travel expenses make studying in aboard really expensive.  So if you plan to send your child abroad for education then you need to consider the same.

2. Estimating future cost of education 
 

• Current education cost :

  Estimate the current cost of education including tuition fees, living expenses, and other associated expenses for the type of education you have planned for.  

• Education inflation :

  This is a crucial factor that determines the future cost of education. The year-on-year education inflation in India stood at 4.13% as of April 2025 which is higher than the year-on-year retail inflation.d For example, an engineering course of Rs. 10 lakh would cost around ~Rs. 18 lakh in 10 years at an inflation rate of 6%.   

• Tenure of course :

  Duration of education will depend on how long the course is. For example, an engineering course lasts for 4-5 years whereas an MBA will last for 2 years.  

• Other associated costs :

  Costs other than the tuition fees will account for a significant portion of the total cost of education. Expenses like accommodation, books, transportation, health insurance, and miscellaneous need to be taken into consideration. 

• Use calculators :

  You can use online calculators to easily calculate the future cost of education by considering education inflation, duration of investment, and expected rate of return on your investment.

3. Evaluation of current financial situation
 

Before planning for the expenses and investment please asses your current financial conditions.

• Current income and expenses :

  Get an understanding of your daily expenses so that you can assess how much you can set aside as investments.  

• Existing savings and investment :

  Asses the value of your ongoing savings and investments so that you can determine how much more you need to invest for your child’s education.    

• Other financial goals :

  Along with your child’s education you might have other major financial goals such as buying your dream home or building a retirement corpus. You should avoid putting your retirement corpus at risk as you cannot borrow for retirement. 

• On-going liabilities :

  On-going loans like home loans, car loans and other personal loans impact your ability to save for your child’s education. 

• Emergency funds : 

  You should make provision for an emergency fund of around 4-6 months of your monthly income to cope with any unforeseen events and continue to save for your child’s education.   

4. Choosing suitable investment options
 

You can choose your investment options based on the following factors:

• Duration of investment :

  For effective child education planning, It is recommended to have a longer investment horizon (8-10 years), so that you are able to invest in market-linked assets and have ample time to gather the funds. 

• Risk appetite :

  Depending on your risk appetite you can choose the investment options. If your child is very young (6-8 years old) and the funds are needed for the child’s graduation then you will have 10-12 years. This will give you the opportunity to invest in high-risk options (equities, mutual funds, or ULIPs). In case you don’t have enough time then it is recommended to invest in low-risk options (fixed deposit, PPF, or endowment plan). 

• Tax benefits :

  Investment in instruments that can help you save tax under the various sections of the Income Tax Act, 1961 like life insurance, ELSS, PPF etc. 

• Diversification of portfolio :

  In order to balance the risk of your invest for such a crucial goal of a child’s education you should diversify your investment across different asset classes such as equity, debt, and fixed returns. 

• Liquidity :

  Choose financial instruments that allow partial withdrawal to cope with any financial emergency.

5. Financial protection
 

• Life insurance :

  The purpose of a life insurance plan is to provide financial security to your family in case of your demise. The sum assured of a term life insurance secures your child’s education even in your absence.  

• Health insurance :

  A comprehensive health insurance ensures that you are covered for any medical emergency and your savings for your child’s education aren’t impacted. 

6. Proactive adjustments
 

• Regular monitoring :

  In case you are investing in a market-lined asset for your child’s education planning then you should review the performance of your funds regularly so that you can make necessary changes.

• Adjustments to investments :

  Adapting your investment strategies to  increasing inflation, market volatility, income changes, and changing career aspirations of your child is crucial to reaching your goal.  

Why Planning for Your Child’s Education Early Matters?

The biggest ally for securing your child’s future is time. When you start financial planning for your child early, especially related to their education, it can make a difference between stressful compromises and seamless progress. 

Following are a few reasons why the early plan is not just smart, but an essential move:

1. Education Costs are rising faster than you think
 

Higher education costs in India have doubled over the previous decade ^f. For instance:

• If you plan to send your child to study abroad, the total cost, including tuition and living expenses, can go up to Rs. 60 lakhs in the USA ^g. 

• Now add 10% inflation in education expenses to that, and this dream can easily feel unachievable if not properly planned. 

Remember, the earlier you plan, the more prepared you will be to beat rising costs and inflation.

2. More time means smaller monthly savings
 

Early planning your child's educational future stretches your timeline and makes the goal seem light in your pocket. For example:

• If you start saving when your child is 5 years old, you may only have to save Rs. 10,000/ month to reach your target.

• However, in case you start saving when your child is 12 years old, you may have to save almost Rs. 20,000/ month.

3. Power of compounding
 

The earlier you invest, the longer your money has to grow due to the process of compounding. Such as:

• Rs. 5,000/ month invested over 15 years at 8% return grows to nearly Rs. 17 lakhs.

• Nonetheless, the same Rs. 5,000/ month for just 5 years might barely touch Rs. 3.7 lakhs in total.

Early planning brings financial peace of mind

Knowing that the future of your child is secure gives you:

• Confidence supports their dreams to get an education from wherever they want.

• Flexibility to explore study-abroad options without financial anxiety.

• Freedom from disrupting your own financial stability.

4. Avoid last-minute stress and loans

If you start planning your child’s educational future late, it may lead to:

• High-interest education loans

• Borrowing from savings meant for other goals (retirement, emergencies)

• Emotional stress during crucial academic milestones

Early planning removes panic from the equation. Instead, you will have a steady, pre-built fund ready when the need arises.

ARN - ED/06/25/25028