Fair enough a question. Education is burning a hole in the pockets of most of the people.

Whether it is an employee at a grocery store asking me

“Sir is it worth paying Rs. 80,000 to NIIT’s Ifbi for my daughter” (this amount of Rs. 80,000 is very close to his annual salary of Rs. 96,000) or The Ceo of a big company saying

“It cost me Rs. 12L per annum + an annual trip abroad” for my kid in class 8, 9 and 10″ and now I am putting him in an IB school in India and it is expected to cost me Rs. 15L+3 trips abroad for his class 11 and 12…

Most of my friends lie between these 2 extremes. Of course many kids went abroad for their undergraduate courses and are burning quite a hole! With no job guarantees for a degree from Australia, NZ, UK and even USA this sexy expensive education is surely a gamble. Or is it?

Over the past 4 decades cost of education (and the amazing and confusing choices) has gone up at a huge cagr – at least double the rate of headline inflation. And that is not changing in a hurry….

Let us now see how to save / invest for your child’s education:

Heard the announcement on the aircraft? If there is an emergency WEAR YOUR MASK FIRST and then try to help others. Exactly. Your retirement needs are far, far more important than your children’s education needs. Sorry but priorities are priorities. In real life people think I am being a jerk for even suggesting this. I will live with that reputation.

Basic principles remain the same – whether it is saving for retirement or for your children’s college. Make sure that you put your children in schools where the other students are of the same caliber, and financial status. For e.g. if your annual vacations (assuming you take one) are in Mabableshwar and Goa it does not help if the kids in your son’s school go to US, France and UK…these kids may want to study in super fancy schools in Europe and you will get bankrupt getting their brochures. So this is lesson 101.

1. Start early: this is the 9455th time that I am saying this in some context but it is absolutely true. So the day your kid is born if you do a say Rs. 30,000 sip you will be able to think of IB. If you do Rs. 3000 plan for something more modest. It is bloody expensive.

2. Be in equities: again said this enough number of times…

3. Be alert to opportunities in asset allocation.

4. If you need to fund overseas education, look at keeping some money abroad in US $ …might just be useful

5. Be honest with Yourself (can I really afford it) and to your children (do they really deserve it?).

6. As the dates get closer scan for scholarship – let the children learn to understand funding is an ISSUE..

7. If money has to be borrowed it SHOULD BE THE CHILDREN who are borrowing….they respect the bank’s money MORE than they respect your money….

8. Involve your kids and track your finances…

WHAT IS THE WORST THING TO DO?

BUY a child plan for Rs. 10,000 a year and hope to see your daughter graduation from Harvard. It took a lot more for a kid in the house to reach there. She did it with scholarship  …..

 

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  1. Dr M.Chandrashekhar

    Good article, Subu… I had a similar dilemma when my son expressed his desire to do Undergrad in US…got admission in Purdue…I paid thru all my orifices for the 4 year course including Edn Loan from a bank by him … came back to India & promptly declared that he is going to be an Entrepreneur & he is not going to work for anyone….I paid up his Edn loan promptly… he struggled with his Start-up initially but picked up very well year on year & on his own , he is repaying me on a monthly basis…. he has started his second start-up, meanwhile.

    Luck/ Hard work/ God’s Grace… whatever you call.

  2. Excellent article Subra Sir…

    I think there is a pretty simple equation which can be formed here …

    Expensive education for children + Expensive insurance policies + Buying a house + Marriage ceremonies in India = YOU WILL NEVER GET RICH (No matter how long and hard you work)

  3. Subra Sir,

    Please do a post on #4. We would like to know how should one go about investing in the US.

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