Increasing Cost
Current College costs range from Rs 3-9L every year in India and Rs 40-50L in the US (including hostel, books, and fees.) And these costs are increasing annually at about 10% in India and 3% in the US.
Inflexible Timeline
Unlike other financial goals, there cannot be any change in the timelines because the joining date cannot be changed. Today the courses, institutes and countries where our children may want to study are numerous. As parents, we want to be financially prepared for our children's dreams.
Benefit of Long Term Goal
As investing for a child’s education is a long term goal, thankfully you can harness the alpha that equity offers to achieve higher, inflation beating returns. A few years before the due date, the funds will be systematically transferred to safer debt instruments.
Start Planning
There are two important numbers to consider: the future value of the goal and the time at hand. Say your child is going to start college ten years from now. Get a rough idea of two options: attending a private University in India or studying in the US. Kindly refer to the table below.
College Education Plan
| Private University in India | University in the US | |
|---|---|---|
| Current Cost of College (incl Hostel) | 3 Lakhs/year | $65,000/year |
| Annual Increase in College Fees | 10% | 3% |
| Cost of 1st Year in 2030 | 8.3 Lakhs | 87.3 Lakhs |
| Cost of 2nd Year in 2031 | 9.1 Lakhs | 92.5 Lakhs |
| Cost of 3rd Year in 2032 | 10.1 Lakhs | 98 Lakhs |
| Cost of 4th Year in 2033 | 11.1 Lakhs | 1 Crore |
| Total Cost for 4 Years | 38.6 Lakhs | 3.8 Cr |
| Monthly SIP required | 8,300/month | 80,400/month |
| Increase SIP annually by | 8% | 8% |
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