A look into how and when parent's must invest for their child's future.
PRE AND PRIMARY SCHOOL
Preschool plays a very important role in the growth and development of a child. Currently, preprimary and primary education, which spans over 3-4 years, costs anywhere between Rs. 75,000 - Rs. 1,25,000 per annum. In keeping with the current rate, it is assumed that the same will cost anywhere between Rs. 1,75,000 – Rs 2,25,000 in the next 5 years. This is enough reason for parents to invest in mutual funds via SIP for their child. Since this is a shortterm investment, parents are advised to invest either in Debt or balanced funds on a monthly basis as soon as the child is born. The fund can be then redeemed after a gap of 3-4 years to pay off for the schools expenses.
MIDDLE AND HIGH SCHOOL
Beginning middle school and through high school, students are introduced to various subjects and career options that they may possibly be interested in. At this stage, the cost of education per annum in India ranges between Rs 1,80,000 – Rs 2,60,000 for classes I – XII per annum. This generally includes the school fee, education material cost, tuition fee as well some extra-curricular activities. Not having to say, the cost will almost double in the next 10 years, and is predicted to range between Rs. 3,50,000 – Rs. 4,60,000 per annum. It is advisable to note that the cost may vary depending on the board in which the child is enrolled. Since one has a 10-12 year investment period, it is advisable to invest in mid and large cap funds through a systematic investment plan.
Higher education in India costs anywhere between Rs. 10 – Rs. 30 lakhs for a 5 year course in steams like engineering, medicine, business management and other science-related fields.Those who study overseas spend anything between Rs 50 lakhs to a crore for a two-three year postgraduation course. Students, today, also consider a lot of offbeat careers. These range from pursuing careers in digital design, pet grooming, wildlife photography, social media management, etc. These specialized courses currently cost anywhere between Rs. 40,000 – Rs. 1,25,000 a year in India. About 10 years down the line, with the education inflation rate of 8 per cent, the course fee is predicted to increase by 30 to 40 per cent at the minimum.
To match these expenses, parents may invest in SIP when the child is born. By the time the child turns 21 years, they would have saved a corpus enough to fund his higher education. At regular intervals, lump sum investments could also be made. Mid-cap and large-cap funds usually give decent returns in the long run, so most financial advisors encourage this mode of investment.