The cost of your child’s education is one of the biggest cash outflows that families must plan for it. After 15 years the cost of an Engineering & MBA course will be Rs 15 lakh & 24 lakh.
Child education is top priorities of each & every parent
If you ask any parent, what are their top priorities? I am sure that their children’s education is on the top list. Whether parents belong to middle or upper class, educated or uneducated background each and every parent want their children must be a well-educated person. But only a few parents able to fulfill their dream because schooling a child is more expensive than ever before.
Only a Few parents able to give higher education to their children
According to the report, the enrolment to higher secondary schooling is only 10% (approx) among the university-age population in India.
The report also compares India’s low (approx 10%) access to higher with China’s 22% enrolment and the 28% enrolment in the US.
How to plan for Your Child Education?
Planning for your child’s education is one of the crucial phases in every parent’s life. It is possible only with the help of proper financial planning.
From the day your child joins the playschool, parents must start investing in their child’s education; the more years he gets to save and he also gets more money at that time.
What is the cost of Education after 15 years?
Or
What is the total amount of money need to save for your kid’s education?
If we analyse the data roughly then we find that on an annual basis the education inflation is about 10-12 percent. Even if we consider education inflation at 6 %, then an engineering course that costs Rs 6 lakh at present will cost around Rs 15 lakh after 15 years. Similarly, an MBA course that costs around Rs 10 lakh would cost around Rs 25 lakh after 15 years.
How to manage the fund for Children’s Education?
To manage a fund for your Child Education most of the parents have two options
1) Take a loan
2) Plan 10 to 15 years early
For Engineering Course or Equivalent:
1) If you take a loan of 15 lakh
From the above picture, you can see that if you take a loan of 15 Lakh
The time period of loan = 15 Years and Interest on education loan = 12%
For 15 lakh loan, you have to pay monthly EMI of Rs 18,000 for the next 15 years
For that loan, you have to pay total amount = 32 lakh (approx)
Here you have to pay Rs 17.40 lakh as an interest which is more than 100% of your principal amount.
2) If you Plan 10 to 15 years early
If you plan 10 -15 years early then you only have to invest Rs 2000/month and after 15 years you will get more than 15 lakh.
From the above chart, you can clearly see that if you invest only Rs 2000/month and after 15 years you will get more than 15 lakh.
Here the rate of interest on your money is 15%.
Here you only have to invest the total amount in 15 years = Rs 03, 78,000 (25% approx).
And reaming amount you will get as an interest = Rs 11, 36,098 (75% approx).
Here you only have to invest 25% money and the remaining 75% money comes as an interest.
For MBA Course or Equivalent:
1) If you take a loan of 25 lakh
From the above picture, you can see that if you take a loan of 25 Lakh.
The time period of loan = 15 Years and Interest on education loan = 12%.
For 25 lakh loan, you have to pay monthly EMI of Rs 30,000 for the next 15 years.
For that loan, you have to pay the total amount = 54 lakh (approx).
Here you have to pay Rs 29 lakh as an interest which is more than 110% of your principal amount.
2) If you Plan 10 to 15 years early
If you plan 10 -15 years early then you only have to invest Rs 3500/month and after 15 years you will get more than 25 lakh.
From the above chart, you can clearly see that if you invest only Rs 3500/month and after 15 years you will get more than 15 lakh.
Here the rate of interest on your money is 15%.
Here you only have to invest the total amount in 15 years = Rs 06, 47,501 (24% approx)
And the reaming amount you will get as an interest = Rs 18, 60,163 (76% approx)
Here you only have to invest 24% money and the remaining 76% money comes as an interest.
By analysing the data here you can imagine how much you can save if you plan it earlier.
How much you are in a loss if you take the loan.
So, be wise and make a wise move.
Take a loan and pay huge interest to the bank for longer period OR
Invest money for a few years and Children’s education without any loan repayment burden.
Equity2Commodity will guide you step by step on how to manage your Children’s Education. This step-by-step guide gives you a complete idea of where to invest in Children’s Education and how much to invest?
