Higher education is a stepping stone to a brighter future but comes at a high cost. There are a lot of factors that have led to an increase, mainly the pandemic and the reopening of the institutes, the rising cause of education is the main cause of tension among parents who struggle to fund the expenses. The expense is even for parents whose children opt to study abroad.

The rising cost of education should not compromise the quality of education. There are a lot of ways through which parents can save money and build a fund pool to finance the higher education of their children.

• Start saving early to save more

It is one of the golden rules that parents should follow. Parents should start saving early to fund the higher education of their children, as the cost of education will rise more in the upcoming years because of inflation. For example, a person has a 3-year-old son who will graduate in 15 years. The cost of graduation in today’s age is Rs. 5 lakh in India. Taking inflation at 10 per cent, the cost of graduation will be Rs. 21 lakh after  15 years. So, the parents should start saving Rs 4,180 per month.

• Explore various investment options

Keeping money in a savings account is not the only way to save money for children’s education. There are a lot of child plans offered by various companies which take care of your child’s education, including insurance coverage.

Some of the investment options for the parents are:

• Sukanya Samriddhi Yojana

This is an account which is run by the government under the Girl Child Prosperity Account for the girl child under the initiative called “Beti Bachao, Beti Padhao”. It is a low-risk scheme with a 7.6 per cent interest rate, and the funds can be withdrawn when the girl turns 18.

• Index funds

Index funds mimic the composition of the market like Nifty, Sensex, etc. They are passively managed by the fund manager, who invests in the stocks in an attempt to replicate the performance of a market index such as the Nifty 50.

• Mutual funds

Parents can invest in mutual funds according to their risk appetite and the money gets automatically debited from the account regularly or at stated intervals. Parents can save up to Rs. 45 lakh over a span of 15 years.

• Education loans

Parents can always take education loans for their children to fund their higher education with collateral or without collateral. The loans do not disrupt the financial planning of the parents as the loan gets repaid, once the child gets employed.

Loans teach financial prudence to children who learn the value of budgeting, and parents can rest assured that the future of their child is taken care of.

Image soucre: Google.