In India, raising a child will set you back 30 lakh for school and a crore for college.

Due to India’s flawed educational system, parents have long known that raising a child is expensive and it’s only getting more so.

This assertion is supported by data. Educating a child at a private school in India from the age of 3 to the age of 17 costs an astounding Rs 30 lakh. When asked how she budgets for her daughter’s school expenses, it is wise to avoid being overly rigorous while making plans for your child’s education. Although inflation has reached uncomfortably high levels, experts argue that these figures do not adequately reflect the suffering caused by rising college costs.

The expense of expanding private education, which is weighted at just 4.5% in the consumer price index based on a formula that is ten years old, has not been properly recognized in inflation figures, according to analysts. According to EduFund, between 2012 and 2016, the cost of education in India increased by about 10–12%. Periodic increases in not just the tuition price but also the cost of transportation and exams have an impact on parents’ total spending.

The developmental years

The reader should be aware that the calculations below were done under the assumption that the pupils were enrolled in a private school. The entrance fee is a one-time cost associated with enrolling a kid in school. The majority of schools in Tier-I cities have an entry fee, which can range from Rs 25,000 to Rs 75,000. Several institutions provide parents with discounts if a sibling is enrolled in school at the same time.

These reductions vary from 10,000 to 20,000 rupees. Kindergarten and nursery are included in preschool. Depending on the school’s reputation, the typical annual tuition cost in the majority of Tier I and II cities can range from Rs 60,000 to Rs 1.5 lakh.

Children attend childcare facilities while both parents are working. Some professional childcare centres in major cities charge up to Rs 5,000–8,500 per day, according to an investigation by ET Online. If parents leave their children at childcare facilities for five hours each day, this cost might reach Rs 2 lakh annually.

The annual cost of elementary school tuition ranges from Rs. 1.25 lakh to Rs. 1.75 lakh. Parents should budget Rs 5.50 lakh for their children’s basic education. The average annual tuition for a middle school is between Rs 1.6 lakh and Rs 1.8 lakh, and the total cost is almost Rs 9.5 lakh. From grade XI on, several schools demand that parents make separate book payments of between Rs. 4,000 and 7,000 each year. High school might cost between Rs. 1.8 lakh and Rs. 2.2 lakh for four years. It is suggested to budget around Rs 9 lakh for high school education overall.

Depending on the city, most schools charge an additional transportation fee of between Rs. 1,500 and 2,500 each month. Parents often spend Rs 25,000 on transportation alone each year, but if gasoline costs rise, this may change in the future. The cost of education will be significantly less expensive if parents choose to enrol their child in a government school, ranging from Rs. 15,000to Rs. to Rs. 20,000 annually.

College education

The majority of middle-class parents now start saving early for college education, which is even more expensive than school. Some people put their faith in loans, while others in scholarships for universities overseas. Poonam Sanghi, a management consultant from Pune, hopes to get her daughter a scholarship for college. Poonam and Rakesh began early planning with a time horizon of 15 to 18 years.

They have made investments in equities, mutual funds, fixed deposits, and more recently, stocks. “The asset allocation is a somewhat skewed distribution. We anticipate spending around Rs 20 lakh on her education total, from preschool through college, adds Poonam. Aarav, the 17-year-old son of Mumbai-based Bindesh Saha and his wife Arpita, is about to go to New York University to enrol in a political science and economics undergraduate programme.

Personal funds and bank loans have been used to pay for Aarav’s schooling. “We estimate that we have spent over a crore on his education so far,” adds Bindesh. “Aarav was enrolled in one of the premier schools in Mumbai and is now attending NYU.”

Both of the Sahas have jobs in the entertainment sector. In addition to bank loans for their costs, Bindesh claims they have also taken up an HDFC NSE 0.25% Student Life Policy as an investment.

Elite colleges

The cost of elite higher education in India is very high. It costs about Rs 4–20 lakh to enrol in a top-tier engineering college, such as one of the 23 IITs or any other private university, for a 4-year BTech or a 3-year BSc. Coaching costs for admission examinations like JEE, JEE (Main), and other tests can cost anywhere between Rs 30,000 and Rs 5 lakh.

A prestigious management school, such as one of the 20 IIMs or any other private university in the nation, costs between Rs 8 lakh and Rs 23 lakh. Coaching for prerequisite exams like the CAT or GMAT is more expensive. A CPA costs Rs 3,60,000 in a profession like finance; a CMA would cost Rs 80,000–120,000, including training, exams, and IMA membership fees.

“Training costs may differ from one institution to another. According to Varun Jain of Miles Education, “Students pay the exam price and the association membership fee in dollars, and any change in the exchange rate may have a little impact on the entire pricing structure.” A Chartered Accountancy degree costs Rs 86,000 in total, not including coaching fees.

A pandemic or a recession are difficult to predict. According to experts, parents should begin making plans for their children’s education as soon as feasible. The greatest way to prepare for a child’s future is to start investing as early as possible and take into account important life stages like education, further education, and even marriage. The founder and CEO of TBNG Capital Advisors, Tarun Birani, argues that we must take both short-term and long-term goals into account while investing.

According to Birani, adding a newborn to the household doubles monthly expenses compared to including an adult. During the first 4–5 years of a child’s development, parents should budget for costs such as food, medication, diapers, clothing, infant care goods, and routine appointments with pediatricians.

In general, the first three years of a child’s life are when parents should anticipate paying 50% of the overall cost of the child’s healthcare. Every year, parents may anticipate at least a 10% increase in the cost of child care. To properly invest their savings, parents might break down their goals. The two types of goals are short-term and long-term. The costs of a child’s education within the next three years, such as school tuition or any extracurricular activity fees, are included in short-term goals. According to Birani, a debt-heavy asset allocation is preferable for short-term goals since it is less risky overall.

Create an emergency fund

“An emergency reserve of 3-6 months’ worth of costs is adequate before children. However, Birani suggests that after having children, it is preferable to save 6 to 12 months’ worth of spending in assets that are close to cash, such as FDs, liquid funds, and ultra-short-term funds.

Parents might also think about increasing the family’s health insurance coverage to at least Rs. 10 lakh and beyond by including the child. Long-term objectives would consist of graduation fees, better education, and marriage. According to Birani, parents should consider investing in a portfolio with 85% equity and 15% debt for long-term goals (more than 10 years).

To ensure capital is safeguarded when the need comes, it is prudent to lower equity exposure and convert funds to less hazardous debt funds when the goals are three to four years away. Birani advises building a portfolio heavy in stocks. However, since some level of capital protection is recommended, parents shouldn’t choose a strategy that is overly aggressive.

edited and proofread by nikita sharma