How Much Should I Save For My Child's Education?

Mr. Joshi has a 10 year old son. He wants his son to study in the US as he was impressed with the opportunities and facilities available for the students in the universities there. Some of us may think, it is too early to plan for it. What if the son is not interested in studying abroad? Well, it is better to be prepared. Moreover education  is a costly affair. It is important to plan for it. Let us look at a cost estimate assuming that his son plans to do a post graduate degree in technology in US. He has around 10 years before he can do that.

Items	Amount in US$
Living Costs - Includes Accommodation, Food, Transport, Books, Entertainment and Utilities. This depends on where one stays. Cost of living in California, Boston or Chicago is much higher compared to some other places.	1000
Tuition Fees /Course Fees - It depends on the course. It can be anywhere between $25,000 to $50,000 For example, the fees for a Masters degree in Computers in Harvard University, Massachusetts is around $56,000 and in the Central Washington University, it is around $35000. A similar degree costs around $22,000 in University of Louisiana at Lafayette.	35000
Health Insurance – At least basic student health insurance is mandatory.	400
Miscellaneous expenses – Visa costs, Application fees to multiple colleges, vacation trips etc. Other expenses like airfare to go to India and back and purchase of big ticket items like laptop, bicycle could be incurred.	3600
Total ($)	40000

If we take Rs. 60 to 1 US$, the total expenditure comes to a rounded figure Rs. 24,00,000. We have to factor inflation in this. Considering an inflation on 6%, in about 10 years the figure will be more than Rs. 40,00,000. It is a big amount and Mr. Joshi has to start planning now if he has not already planned his finances for this.

There are different ways to achieve the goal of funding your child's education -

Scholarships – Students can apply for scholarships. They can reduce the fees quite a bit. It is important to keep track of scholarships and follow the application process properly.

Investments – Mr. Joshi should invest in a range of products such that his capital is protected and at the same time, he manages to beat inflation and build some corpus. He can have a diversified portfolio of debt related investments and equity based investments. He can invest in MF schemes that fulfil his objectives.

Education Loans – You can get an education loan. Most public and private sector banks give education loans. Choose one with a low interest rate and easy exit options.

Work while studying – Your child can take up a part-time job while studying the US. He/She will earn money and at the same time get valuable experience and understand the value of money.

It is important to plan well in advance when it comes to funds for your child's education. You should have a diversified investment portfolio so that you get optimum returns and your investment risks are minimized.