By Anand Mahishi: Mr. Engineer, 32 years was well settled in a private company. He was married and had a daughter of 3 years old and a son of 1 year old. With a handsome salary on hand happiness was everywhere. During his college days, he had wished to study in prestigious management college but could be fulfilled as most of their family saving were spent on getting his father illness treatment. Days passed, he slowly understood the realty and did his best in studies in a local college and had got the job through campus selection. However, his dream of studying in management college had not erased form his mind. With two kids now, he dreamt of sending at least one of the kid to the best college when he/she grows up.

Dreaming or wishing is good but without proper financial planning dream would remain a dream. Mr. Engineer has to also think of some unforeseen events like, death, disease or disability, which might again hinder or spoil his dream of sending his kid to the management college.

As like Mr. Engineer, we parents have our own dreams on our children's future.

Are we prepared for meeting or achieving our dreams if yes fine, if not what options do we have?

Securing MY CHILD Future: The Imperative of Education Planning in India and How to accomplish it.

The dream of providing a quality education for one's children is a universal dream or desire for Indian parents. However, this dream is increasingly colliding with the harsh reality of continuous raise in education costs. What was once a manageable expense has now transformed into one of the most significant financial challenges a family will have to face. In this type of situation or environment, proactive and strategic financial planning is not just advisable-it has become a necessity.

The Soaring Cost of Education: A Statistical Reality Check

The urgency for planning is underscored by alarming inflation rates in education, which consistently outpace general consumer price inflation. Consider these compelling statistics:

• Education Inflation: The cost of education in India has been rising at an average annual rate of 10-12%, nearly double the general inflation rate of around 5-6%. This means the cost of education doubles approximately every 6 to 7 years.
• Engineering Degree: A BTech degree from a premier private institution in India today can cost between ₹15-20 lakhs. At a 10% inflation rate, in 15 years, the same degree would be costing around ₹62 lakhs to ₹83 lakhs. (Will a middle class family able to afford it?)
• Medical Degree: The figures are even more daunting for medical aspirants. A full MBBS course at a private medical college can now be around ₹75 lakhs to ₹1 crore. Considering the education inflation, this cost could easily surpass ₹3-4 crores by the time a child born today is ready for Meical college admission.
• Higher Studies Abroad: For parents aspiring to send their children abroad, the numbers are enormous. An undergraduate degree in the US or UK, including tuition and living expenses, can currently cost ₹1.5-2 crores for the entire course. In 18 years, this figure could be around ₹6-8 crores.

Arranging this amount without a proper plan can lead to devastating consequences: taking on massive education loans that burden the child or the family for decades, compromising on the quality of education, or, in the worst case, derailing the child's academic dreams entirely (Also, need to consider that today's generation come with high aspiration as they have social media and other platforms in their palms). Most of the kids of this generation kids do not have the patience or carry emotions like earlier generation. Hence early Planning harnesses the power of compounding, turning manageable monthly contributions into a substantial corpus over time.

Investment and Saving Avenues for Indian Parents

Thankfully, the Indian financial landscape offers several tailored options for education planning. The right choice depends on the parent's financial goals, risk appetite and investment horizon

1. Equity-Linked Savings Schemes (ELSS): These are tax-saving mutual funds with a lock-in period of 3 years. While primarily used for saving tax under Section 80C, they are an excellent long-term wealth creator. Given their equity orientation, they have the potential to generate returns that can beat education inflation over a 15+ year horizon.

2. Children Funds (Mutual Fund): These mutual funds invest in stocks and bonds. They normally come with lock in period of 5 years or until the child attains 18 years.

These funds normally come in two types – Equity focused and Debt focused. Normally withdrawals are restricted so the very purpose of investment is achieved.

Examples of Children's Funds

Source - Angel one

3. Mutual Funds (Systematic Investment Plans - SIPs): This is arguably the most powerful and flexible tool for building a large education corpus investing a fixed amount monthly in equity-oriented mutual funds (like Flexi-cap or Multi-cap funds), parents can benefit from rupee cost averaging and the high growth potential of equities. A SIP of ₹10,000 per month at a 12% annual return can grow to approximately ₹1 crore in 18 years.

Suitable for Parents with a high-risk appetite and a long investment horizon.

4. Unit Linked Insurance Plans (ULIPs): Modern ULIPs offer a transparent structure combining insurance and investment. They allow investors to switch between equity and debt funds based on market conditions and goals. The long-term lock-in helps in disciplined saving and wealth accumulation. The big advantage that the ULIP's carry is the inbuilt or rider option like“Waiver of premium”. This helps the parents to ensure that their goal of child education expenses (assumed) or the marriage cost (assumed) would be fulfilled in their presence or in their absence

5. Tradition Plans (Endowment): These insurance plans also come with 'Child Plans” to take care of the Children education or marriage expenses. These are bundled products and comes in two varieties like – Participating and Non Participating policies. Basis the assumed cost of the goal, Sum assured can be chosen. This plan also comes with Waiver of premium benefit in case of death or Critical illness.

Both ULIPs and Traditional plans comes with tax benefits.

Suitable for: Those seeking a bundled product (low risk) or non-bundled (insurance + investment) with flexibility.

6. Sukanya Samriddhi Yojana (SSY): A flagship government scheme exclusively for the girl child. It offers a sovereign guarantee and a highly attractive, tax-free interest rate (currently around 8.2% p.a.). Investments qualify for Section 80C deductions, and the entire maturity amount is tax-exempt.

Highlights of SSY

• Minimum deposit ₹ 250/- Maximum deposit ₹ 1.5 Lakh in a financial year.
• Account can be opened in the name of a girl child till she attains the age of 10 years.
• Only one account can be opened in the name of a girl child.
• Account can be opened in Post offices and in authorised banks.
• Withdrawal shall be allowed for the purpose of higher education of the Account holder to meet education expenses.
• The account can be prematurely closed in case of marriage of girl child after her attaining the age of 18 years.
• The account can be transferred anywhere in India from one Post office/Bank to another.
• The account shall mature on completion of a period of 21 years from the date of opening of account.
• Deposit qualifies for deduction under Sec.80-C of T.
• Interest earned in the account is free from Income Tax under Section -10 of T.

Suitable for: Parents of girl children; low-risk appetite investors or more suitable for conservative investors.

7. Public Provident Fund (PPF): A classic long-term savings vehicle with a 15-year tenure. It offers safety, tax-free returns (currently 7.1% p.a.), and tax benefits under the EEE (Exempt-Exempt-Exempt) regime. While returns may be slightly lower than education inflation, it forms a stable, risk-free core for the education corpus.

Highlights of PPF

• Minimum deposit ₹ 500/- & Maximum deposit ₹ 1,50,000/- in a Financial year.
• Loan facility is available from 3rd financial year upto 6th financial year.
• Withdrawal is permissible every year from 7th financial year.
• Account matures on completion of fifteen complete financial years from the end of the year in which the account was opened.
• After maturity, account can be extended for any number for a block of 5 years with further deposits.
• Account can be retained indefinitely without further deposit after maturity with the prevailing rate of interest.
• The amount in the PPF account is not subject to attachment under any order or decree of a court of law.
• Deposit qualifies for deduction under Sec.80-C of T.
• Interest earned in the account is free from Income Tax under Section -10 of T.

Source – NSI

Suitable for: Conservative investors; a foundation for the overall portfolio.

8. National Savings Certificate (NSC) & Senior Savings Scheme (SCSS): These fixed-income instruments offer safety and fixed returns their returns may not outpace education inflation significantly, they can be used to park funds as the goal year approaches to protect capital.

Suitable for: The final few years of the investment horizon to de-risk the corpus.

Crafting a Winning Strategy

A planned and long term thought approach is rarely reliant on a single product. A diversified portfolio works best

The Golden rules for any children future planning is:

• Start Early: The single most important factor. Time is your greatest ally.
• Define the Goal: Estimate the future cost of the desired education and calculate the required amount for investment.
• Asset Allocation: Adopt an aggressive equity-heavy portfolio when the child is young. Gradually shift to a more balanced or debt-oriented portfolio as the child enters their teens to protect the accumulated wealth.
• Review Annually: Monitor your portfolio's performance and adjust your SIP contributions to stay on track to meet your target.

In conclusion, the rising cost of education is a formidable challenge, but it is not insurmountable. With careful planning, disciplined investing, and a well-chosen mix of financial instruments, Indian parents can confidently build a corpus strong enough to turn their children's academic dreams into reality, without the shadow of financial strain.

(Mr. Anand Mahishi has over 15 years of experience in the Banking, Financial Services, and Insurance (BFSI) industry, following an 18-year entrepreneurial journey. He currently serves as an Assistant Professor at the Manipal Academy of BFSI, where he blends industry experience with academic insight to mentor and shape the next generation of insurance professionals.)

Manipal Academy of BFSI is a premier training institution that has successfully trained over two lakh officers across leading banks and insurance companies in India, contributing significantly to the professional development of the BFSI sector.

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