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Plan for Education like Any Other Financial Goal in Life



A good education is an asset that can never be taken away, an investment that can never depreciate. Hence, when a survey tells us that young parents in India believe that education determines a child's future and if they are able to give the right input to the child in terms of a good education, they have done their job, it echoes the sentiments of many parents we meet. However, with the rising cost of education, parents have to save and bear the burden of rapidly-increasing fees right from preschool, school to college. The rise is certainly alarming for the large section of middle-class parents in India, who will not be able to afford the cost unless they do early financial planning. Considering the most common career aspirations a parent may have for a child — an MBA, an engineering degree or medicine. Let's take an example of doing an MBA from a premier management institute. The cost of doing an MBA from IIM-A has increased from . 3.16 lakh in 2003 to . 12.5 lakh in 2009, an eduflation of nearly 22%. Even if we take a moderate inflation rate of 11%, an MBA could cost over . 22 lakh in the next 10 years. In the research Education Insights with IMRB International, we found out that the majority of parents in the country – nearly 81% – are concerned about the rising cost of their children's education even more than their health, lifestyle or marriage. Around 30% of the parents are concerned more about the educational expenses than performance in school or marks. A large section of parents, 57% in metros and a whopping 71% in non-metros want to send their children to play school which increases the education expense early. For 69% of the parents, school fee is one of the top concerns while selecting a playschool. Additionally, a number of students supplement their regular school/college studies with specific coaching, leading this to be the next biggest expense for parents after school tuition. Also one out of every 10 parents wants to send their child abroad for higher studies. It is not surprising then to see that 72% young parents are saving for their children's future as compared to 52% for investment protection and 45% for retirement.


So do these aspirations and concerns reflect into higher savings and planning for a child's future? Unfortunately not. While a large number of parents have concerns about saving, an equal number don't have a clear idea on future cost of education and various tools to do proper planning. Around 81% of the parents admitted that they don't know how much higher education will cost. On an average, young parents save around . 26,000 p.a. which amounts to a mere . 4.67 lakh over 18 years, which clearly will not be sufficient for any career aspirations unless supplemented by loans and other means of income. Parents may want additional funds not only during higher studies (26%) and graduation (21%), but also as the child approaches the 10th standard (19%). Many parents today are also open to letting their children choose the career they want to be in want to provide them with the best possible education for the same, including additional coaching and studying abroad. However, there are a very few who actually go a step ahead and do proper financial planning and in-vestments to meet this need.


One out of 2 parents believe that insurance is the most effective tool to cushion the child's education cost. In case of an untimely death, they believe the money will provide for the child's education. However, out of these, only 13% parents are properly planning for their child's education and saving through specific child insurance plans designed for providing funds for key education mile-stones. Other modes of saving also include fixed deposits in banks/post offices, national saving certificates, jewellery/gold and in some cases mutual funds as well. The awareness of the corpus needed to fulfill their children's aspirations and the subsequent planning and investing in various options according to the returns and risk profile should be the first step to education planning for any young parent. So, proper planning, awareness and investments, should help you plan for it like any other easily attainable financial goal.

 

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