Smart Education Planning Today to Nurture Independent Leaders Tomorrow

August 23, 2025

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As a parent, you have a dream for your child. It's a vision of them blessed with the best education possible, poised to be future leaders, innovators, and entrepreneurs. This dream, however, rests upon a foundation of financial planning that has to be put in place today. In India, where the cost of good-quality education is growing at a staggering rate, a well-planned approach is required.

The best gift you can give your kid is the gift of a debt-free education. It's the ultimate launching pad for independence, the foundation on which they can start their professional lives unfettered by the weight of a student loan.

The Sobering Reality

Before we can plan, we need to know the problem. The price of education in India is rising at a rate that exceeds average inflation. While overall inflation may be 5-6%, inflation in education is always double digits, sometimes between 10-12% per year. That means that the price of a degree may double every six or seven years.

Let's place this into context. A four-year degree from a private college that is priced at about ₹15 lakh today may be more than ₹60-₹80 lakh in 15 years. A medical degree, which may be ₹50 lakh in a private college today, may reach ₹2 crore by the time your child is ready to go to medical school.

These figures may be overwhelming, but they are not intended to discourage. They are intended to rally us into action because we do have a strong ally by our side: time. Indian families are already spending a significant percentage of their income on education, according to recent government polls. This outlay, therefore, should be proactive rather than reactive.

The Power of Starting Early

The greatest weapon in your arsenal is an early start. It's the magic wand that gives the magic of compounding its greatest impact. The longer the period your investment has to grow, the more spectacular the outcome.

Imagine two parents, Mr Sharma and Mr Verma, both wishing to create a corpus for their child's education.

● Mr Sharma begins a SIP of ₹8,000 every month when his child is born. Based on an assumed 12% annual return, by the time his child is 18 years old, he would have invested ₹17.28 lakh. His total would be around ₹60 lakh.

● On the other hand, Mr Verma starts only when his son is eight years old. To reach the same target of ₹60 lakh in just ten years, he would have to invest more than ₹26,000 a month.

By beginning only seven years sooner, Mr Sharma reached his target with a much lower monthly contribution. That is the magic of time. The sooner you sow the seed, the taller the tree will grow.

The Blueprint for Success: Goal-Based Investing

A general idea to "save for the future" is nowhere near enough. The most effective strategy is goal-based investing, which assigns each rupee a defined purpose.

1. Define the Goal: What is the specific educational landmark? Be as specific as possible.

2. Estimate the Future Cost: Utilise an online education inflation calculator or meet with an advisor to estimate the future cost of that particular degree. Your target is this amount.

3. Establish a Timeline: You have how many years before the money is needed? This is your investment horizon.

4. Build an Emergency Buffer: Before starting investment towards education expenses, keep a separate emergency fund for unforeseen expenses such as medical requirements, travel, or currency fluctuations. This keeps the education corpus intact. Preferably, keep 3–6 months of household expenses in low-risk, easily liquidated forms like a high-interest savings account or short-term fixed deposit.

5. Select the Correct Vehicles of Investment for Diversification: Your investment plan needs to be according to your timeframe. For a long-term target, such as education (10+ years in the future), you can take a bit more risk to achieve greater returns. Some of the strategies to try are as follows:

● Equity Mutual Funds through SIP: This should be the backbone of your plan. An SIP in a diversified fund enables you to take advantage of rupee cost averaging by lessen the impact of market volatility and optimise the power of compounding. Equity mutual funds are well-suited for a period of 10 years or more because they have a chance to outperform inflation. For parents with a shorter investment period or lower risk tolerance, hybrid mutual funds (which invest in a mix of equity and debt) and debt mutual funds (which invest primarily in bonds or fixed-income instruments) offer more stable but moderate returns, with reduced exposure to market volatility.

● Sukanya Samriddhi Yojana: For parents of a girl, this is a government-backed scheme offering a tax-free interest rate of around 8%. The account can be opened any time before your daughter turns 10 and allows deposits up to ₹1.5 lakhs annually, with maturity at 21 years of age or her marriage after 18. The interest earned and maturity amount are completely tax-free, making it an EEE (Exempt-Exempt-Exempt) investment. It’s a safe, long-term investment for education or marriage planning of a girl child.

● Public Provident Fund (PPF): Secure, long-term investment with ~7.1% tax-free returns, section 80C benefits under the old tax regime, a 15-year lock-in (extendable) and yearly contribution cap of INR 1.5 lakhs. It provides guaranteed returns and portfolio stability for long-term goals like a child's education.

● Stock Investments: Direct stock investment can potentially offer high-return potential but with risk and requires expertise. Allocating a portion of the corpus to direct equities can provide diversification to the overall portfolio. If held long-term, these investments can greatly add to the growth prospects of the education fund of the child.

● Education Savings Plans (ESPs): Children’s ULIPs combine insurance with investment in equity/debt funds, offering tax benefits, disciplined saving, and life cover. ULIPs which are regulated by IRDA, may offer relatively less transparency in fund performance disclosures and investment structures compared to SEBI-regulated mutual funds, which follow strict norms on reporting, liquidity, and investor rights.

When the target is near (in 3-4 years), it is essential to de-risk your portfolio by systematically transferring the money from equity to secure debt vehicles in order to shield the built-up corpus from market fluctuations.

6. Select Right Investment Roadmap for Your Child’s Educational Success: To make this journey easier, you can divide the investment process into distinct phases depending on how far the goal is:

● Growth Phase (10+ years away): When a decade is left for college, time works in your favour. Invest in equity mutual funds or direct equities for high returns, assisted with risk-free alternatives like PPF or Sukanya Samriddhi Yojana (SSY). Equity markets are unpredictable, but over 10–15 years, they tend to outpace inflation and multiply your money via compounding.

● Consolidation Phase (3–2 years away): As the target approaches, transfer funds step by step from equity to safer avenues such as debt or hybrid funds. This ensures profit booking and prevents last-minute losses. Don’t switch all your investments at once. Instead, use a Systematic Transfer Plan (STP) or make manual gradual shifts every few months.

● Safety Phase (2–1 year away): At this point, "safety first" is the mantra. Transfer most money into liquid low-risk investments such as debt mutual funds or fixed deposits. Stay away from equities altogether.

● Final Year (last 12 months): In the last year, park all funds in ultra-safe, easily accessible options like liquid mutual funds, high-interest savings account, or short-term fixed deposits. Exit equities fully to avoid sudden market risks.

● By matching your investment plan to your timeline and periodically reviewing your portfolio, you can create the corpus required and ensure that when your child is eligible for their dream college, so are you.

7. Seek Professional Guidance if Needed: If you are not sure how to navigate this transition, seek personalised advice from a financial advisor. They can assist in making a plan that is best for your needs, schedule, and level of risk tolerance. Even if you don't employ a professional, have it as a habit to check your portfolio regularly and rebalance if necessary.

Your Commitment to Their Future

Educational planning for your child is one of the biggest acts of love and responsibility a parent can ever do. It's a long-term commitment that demands discipline, vision, and a clear strategy. With an early start and goal-based investment strategy, you have an attainable plan. Remember, you are not merely saving money; you are investing in your child's dreams and future. You are planning smartly to raise tomorrow's leaders.

-Sukalyan Halder & Akshit bajaj

-Dayco India

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