Higher Education Planning

Higher Education is the Business!

Education is extremely important for those hoping for success in the twenty-first century. Education open doors  to success. People without a formal education may find it extremely difficult to compete with those with degrees.

Though education is the basic right of every human being but unfortunately, Education industry is a business these day. In our country Higher Education is a commission, not the mission. Some rich Parents are ready to pay so much money so that their children will study in a better environment but poor people cannot afford to pay high fees. Tuitions are also very expensive.

The govt of India has to contemplate the education system of India to secure future of children because present children are the future doctors, engineers, corporate, pilots, scientist etc.

The cost of higher education is already high and rising at 10-12 per cent a year. Therefore Children's education is one of the biggest cash outflows that parents must plan for. A four-year engineering course costs roughly Rs 12 Lakh right now will rise to Rs. 50 Lakh after 15 Years if increase 10% every year.

Planning Your Child’s Higher Education

Introduction
In this article, we will explore how should parents go about building a fund for their child’s higher education.

Steps in Child Education Planning
To understand the process of child education planning let us take an example. Rajesh’s son Mohit is 1 year old. He wants to accumulate money for Mohit’s higher education (MBA). Let us see how Rajesh should go about building the education fund.

Step 1: Current Cost and Time Horizon
Mohit is 1 year old and he will take admission in a B-school when he will turn 20 years old. So Rajesh has 19 years on hand to plan the education fund for Mohit. As per Rajesh’s estimates, the current cost of doing the MBA course is Rs. 10 lakhs.

Step 2: Calculate the Future Cost of the Course
The cost of the MBA course will be significantly higher 19 years down the line.

Let us assume that the cost of education will rise by 10% every year. The MBA course that costs Rs. 10 lakhs today will cost a whopping Rs. 61.15 Lakhs (61,15,909.04 to be precise) 19 years down the line if education costs rise by 10% year on year. So Rajesh will have to make sure that he has a kitty of Rs. 61.15 Lakhs when Mohit is ready to take admission in a B-school.

Step 3: Make an Investment Plan
Now that Rajesh knows that he needs to build an education fund of Rs. 61.15 lakhs in 19 years, how should he go about building this fund? A professional financial advisor can make an investment plan that will help Rajesh realise his financial goal.

Rajesh has 19 years to realise his financial goal. If Rajesh invests Rs. 86076 every year (Rs 7,173 per month) in an investment portfolio that earns 12% returns, then at the end of 19 years he will have Rs 61.15 lakhs.

The above investment plan explains how Rajesh can accomplish his financial goal of Rs. 61.15 Lakhs in 19 years.

Step 4: Implement  and regularly review the plan

Rajesh can consult his financial advisor and accordingly invest in a portfolio such that his investments generate returns of 12%. Let us see how Rajesh can go about building Mohit’s higher education fund.