EDUCATION-PLANNING FOR CHILDREN’S EDUCATION
Planning for our child’s education can be an education in itself. Since this goal has a lot of emotional value attached to it, it can lead to some stress. Before we start estimating the amount we need, it is better to research thoroughly without falling for hearsay. Finding out all the actual numbers, breakups, scholarships, offers and the whole deal is important before we start setting aside a fund for the same.
An education fund is no longer just about the fee for a course. It must include all other incidental expenses too. These expenses can be categorised into the following:
1. One-Time Expenses:
b.Application and Admissions
These days, admission to any professional course like AIEEE, JET, GMAT, GRE, CAT requires enrolling in coaching classes. The expense you incur on a coaching class may vary from the course you choose and the city of residence. For example, coaching for MBA Entrance exam can range from Rs. 8,000 – 35,000; depending on the nature of the classes. Some courses like Chartered Accountancy may even require coaching for longer period of time.
Almost all colleges that our child would apply to would have an admission form, which would be an additional cost. For students applying abroad, application process may also include expenses incurred while acquiring and shipping transcripts and other collaterals.
The fund that we propose to build, should meet the costs of your child’s coaching and application procedures.
2. ANNUAL EXPENSES:
b.Travel and Hostel Fee
The fee charged for a course varies across institutes and disciplines; professional courses like Engineering or Medicine often are more expensive than those offered under Arts and Humanities. As a matter of fact, fee for a common course like a B.Tech can vary depending on the college, country or university. The financial advantage we have is that the course fee can be paid over the duration of the course; We have a little more time to accumulate it. Apart from a lumpsum amount to be paid at the time of admission, we can cover the fee amount easily if we create a fund accumulation schedule.
Let us not forget that if our child is commuting daily to college, we might want to set aside funds for their travel and daily expenses. And if our child gets admission to college in a different state or city, we might have to include their hostel and mess fees, and travel expenses. We might also want to plan for our travel expenses, for all the times we miss them!
By now we have a fair estimate about the expenses we might incur, so how do we go about planning for them?
Estimating the money we need at every stage and we also know how much time we have to save for which expense. For example, if our child is in class 10, then we have to first put aside money for the expenses of his entrance exam coaching, now. This expense is due in less than 12 months! For the farthest requirement, the best thing to do is to invest in equity, like the post graduation fee. We have at least 5 years before it falls due. For the short term requirements we need to invest either in debt funds or in bank deposits. This way we will be able to balance both return and time risk.
The soundest of all financial advice is to stay away from loans as much as possible. So let us make it sure an education loan is our last option.
While planning for our child’s education fund, we have also to plan to sufficiently providing for our retirement. Unless we balance our retirement with our other goals, we will end up into a financial strain on the very child whose education we are planning for with so much care.