Here is a structured process to tackle inflation in education costs

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tackle inflation in education costs

Since the time Alia was born, her parents Deepak and Shweta had started a savings account specifically to fund her educational expenses. The money their relatives showered on the newborn all went into the savings account. They had asked their relatives to forego expensive presents and instead help them save up for her education. Deepak and Shweta’s relatives respected the new parents’ wishes and helped them build up her educational corpus. Both parents also made sure to keep contributing to the fund on a regular basis. By the time young Alia was ready to start kindergarten, her doting parents had already accumulated close to Rs. 10 lakh for her. However, they soon found out that the money they had painstakingly saved for their only child would be barely enough to cover her educational costs incurred until the fifth grade.

While they had known that educational costs would continue to rise, they had neglected factoring in inflation while estimating the financial burden of her entire educational graph. Even as they wondered how they could better assure her future, Shweta learnt from her colleague about a child education plan that she was investing in to secure her own son’s higher education. Since her son was around the same age as Alia, Shweta’s colleague estimated that Alia’s parents could also buy a similar plan which would ensure that Alia would never be at a loss for funds while pursuing her dreams.

Child education plans are tailored to suit help fund a child’s education, even if their parents are no longer around. A child education plan can ensure that the child can comfortably fulfill their aspirations, without ever worrying about a lack of funds. It also helps them avoid student loans, which can serve as a terrible financial burden on the child in later years. However, educational costs in India are rising rapidly. They are further propelled by rising inflation, which makes quality education very expensive and serves as a financial burden on the rest of the family.


Read on to learn how one can tackle inflationary costs of education, with aid from a child education plan.

1. Include the cost of inflation while estimating how much the child will require:

This is the most important point to keep in mind while estimating the expenses that the parents will incur while ensuring their children’s education. Like Deepak and Shweta mentioned above, parents generally consider existing educational costs while building up their corpus, assuming that the amount will remain the same over the years. Forgetting to factor in inflation is a crucial error, since that is what will cause the greatest rise in costs. It is important to observe the trend of inflation over a period of time and estimate future costs accordingly.

2. Pick the right investment instrument:

While a slate of options exist that act as investment instruments, the requirement of the investor and the purpose behind investing is what essentially differentiates them. With many different investment instruments available in the market which can be chosen according to the investor’s risk appetite, child education plans are gaining popularity with young parents since they are structured specifically for the purpose of building a corpus for the child’s higher education needs , even if their parents aren’t around. Child education plans require payment of premiums over a period of time, which build up into a corpus that the child can fruitfully utilize at their time of need. With experts available to guide the young parents on the best way to invest their funds, child education plans are able to safely hedge inflationary risks.

3. Important to begin investing early:

It is of the utmost essence that parents begin investing early . Regardless of how much they can invest, if they begin investing early with even small amounts, they can build up a substantial corpus over time. The earlier the investment process begins, the more money will be available for the child to pursue their dreams. The power of compounding can never be underestimated, especially while pursuing a financial goal. If the investment process is delayed, there are chances it may never happen. A child education plan ensures a systematic process of payment which brings in the discipline required for building up the corpus. Later, as income levels grow, parents can invest more and thereby gift their child with a suitable corpus. For instance, even if parents start by saving Rs. 5,000 each month from the time the child is born to when they are 17 years old, it will amount to a corpus of more than Rs. 10 lakh which can ensure the child’s freedom in pursuing their goals.

 

Rising inflation is steadily pushing up education costs, which are bound to be exorbitant in several years time. It is necessary to start building a corpus, with the aid of an appropriate child education plan, which can ensure the child wants for nothing. The Assured Education Plan allows for premium payments with as little as Rs. 2,000 a month which can result in Rs. 20,00,000 by the time the child is ready to pursue their higher educational dreams.

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