Cause For Concern: Cost Of Education Slated To Grow At Faster Rate Than Inflation
EVERY parent today wants to be able to provide enough for his/her child so that they can follow their dreams. As per an Education Insights survey, conducted by Aviva and IMRB, investment in education is the topmost priority for Indian parents.
Besides education, marriage and entrepreneurial goals are two other needs which require maximum attention and planning from modern-day parents. The survey reveals that education ranks as the foremost concern for 81 percent of parents' savings for child's future. Around 47 percent parents remain concerned about the cost of higher education which is slated to grow at a far higher rate owing to rise in inflation, and feel that it requires planning at their end.
In today's scenario, no parent can guarantee that they would be around forever to take care of their child's financial needs. As a parent, you can't rather guarantee that the child's financial needs are taken care of, whether you are there or not! Life insurance helps provide that guarantee. Not only do life insurance products provide financial protection from your family in case something unfortunate happens to you, they also have a savings element for your long-term needs. As per the survey, one in every two parents believe insurance is the most effective tool to cushion the child's education cost, out of which 13 percent are saving through child insurance plans.
The rising cost of education—which is slated to grow at a rate far higher than inflation, along with the resulting decrease in the value of money—has become a deep cause of worry for most parents today. Let us illustrate this using an example: The cost of pursuing a degree in medicine abroad, which is around Rs 93.6 lakh at present, is expected to soar to over Rs 2.48 crore in twenty years. Similarly, twenty years from now, one may need to shell out Rs 1.27 crore for an overseas MBA degree that costs Rs 48 lakh today. One needs to assess what his exact requirement would be, post a certain time-frame. This is because what is worth Rs 500,000 today, will be worth Rs 15,00,000 twenty years later. In fact, the survey tells us that 81 percent parents admit that they don't know how much higher education will cost in the future and on an average parents are saving Rs 26,000 p.a, which amounts to merely Rs 4,67,242 lakh over 18 years, showing how parents are grossly under saving for future education.
So how do parents combat financial volatility given the current economic scenario? Well, the answer to this is fairly simple. All you have to do is, be smart while planning your investments. The key to successful planning of a child's future is in starting early and assessing needs (keeping in mind the hidden costs) carefully. Parents need to adopt a disciplined and a systematic approach towards savings with a longterm perspective in mind.
There is a plethora of investment and savings instruments available in the markets today. This, however, has its own pros and cons—while it gives you a bigger basket to choose from, it also leads to confusion. Here, prudence is to assess your needs and choose a product which suits your needs. It is advisable to take help from a financial adviser instead of going by word of mouth.
Unit-linked child life insurance plans have been popular world over and have been increasingly gaining popularity in India as well. Child plans not only fulfill the investment objective, but also provide protection in case something unfortunate happens to the parent. This is the only product that ensures that the corpus that you have planned to save for their child's future is available when your child is 18 or 21 years old unlike other savings instruments. The choice of product, however, depends on the risk appetite of parents. i.e. good balance of risk and safety is of vital importance when it comes to planning for a child's future.
There are various plans available in the market, with options like premium waiver, so that the policy continues even in case of the parent's death, disability or critical illness (if the rider has been opted for), while the life cover is paid out. Income benefit plans also provide regular income (if the rider has been opted for) to meet the child's everyday expenses in case of the parent's death. On maturity you get the fund value.
While you may well have secured your own future through a financial plan, it is equally vital for parents to plan judiciously and proactively for their child's future, so that the resources are accessible for the child's most important career aspirations as they may surface at a time when it may be difficult to start saving afresh.
Once again, while the key to successful planning for your child's future is to start early, at the same time, it is never too late to get started.
