How to Plan for Your Child's Higher Education Cost

Higher education is the biggest planned expense for most Indian families after a home. The earlier you put a number on it, the smaller the monthly saving needs to be.

Step 1: Estimate today's cost

Add up fees, hostel, food, books, travel and living costs for the whole course. Rough current examples:

• Private engineering (4 years): ₹12 to 20 lakh
• Private MBBS (5.5 years): ₹60 lakh to over ₹1 crore
• MBA at a top private institute: ₹20 to 30 lakh
• Master's abroad including living costs: ₹35 to 60 lakh

Step 2: Add education inflation

Education costs have been rising faster than general prices. Using 9% a year:

• ₹16 lakh today becomes about ₹45 lakh in 12 years
• ₹25 lakh today becomes about ₹70 lakh in 12 years

Formula: future cost = today's cost × (1 + inflation) ^ years.

Step 3: Count what you already have

If you've saved ₹1.5 lakh and it grows at 11% for 12 years, it becomes about ₹5.2 lakh. Subtract that from the future cost to find the gap.

Step 4: Work out the SIP

For a gap of about ₹40 lakh in 12 years at 11% a year, a flat SIP of roughly ₹14,000 a month is needed. A SIP that rises 10% every year can start near ₹9,000 and grow with your income.

Step 5: Choose where to invest

• More than 7 years away: mostly equity mutual funds, plus safe options like PPF or Sukanya Samriddhi for a part
• 3 to 7 years away: a mix of equity and debt
• Last 2 to 3 years: move gradually into debt funds or FDs, so a market fall right before admission doesn't hurt

Common mistakes

1. Using today's fees as the target.
2. Starting when the child is in Class 9 or 10. The SIP then needs to be three or four times bigger.
3. Keeping the goal money in a savings account.
4. Using goal money for other spends. Keep it in a separate folio or account.

Review once a year

Check the plan on your child's birthday. Raise the SIP with your salary, update the course cost if your child's interests change, and start shifting to safer options in the last few years.

Use safe options for part of the goal

PPF, Sukanya Samriddhi (for daughters) and recurring deposits are useful for the part of the goal you don't want exposed to the market. Many families split the monthly saving: two-thirds in equity funds while the goal is far away and one-third in safe options, then shift more to safe options as admission gets closer.

Our Child Education Goal Planner works out the future cost, the flat and rising SIP needed, and a year-by-year path, for any course you choose.