7 Tips to Deal with Your Child’s Education Expenses
The spiraling costs of education are a hot topic today. Most parents find it difficult to cope with the high cost of living and then they are slapped with extra thousands as education fees. They may have saved up, but if the need is more than what is saved, most parents resort to education loans to bridge the gap.
Some of the common education costs are:
- Tuition fees
- School supplies
- School transport (public transportation, school bus or carpool expenses)
- Extra-curricular activities like swimming or ballet classes
- School field trips or tours
- Project material costs
A recent HSBC Value of Education survey finds that on average, Indian parents spend ₹ 3.62 Lakh for their child’s undergraduate and post-graduate studies.
The survey also reveals some sacrifices parents make to support their child’s education such as:
- 60% of parents took less expensive holidays
- 49% of parents took on extra work
The survey also points out that 61% of parents expressed regret that they didn’t start saving for the purpose earlier. And that’s a valuable insight!
If you plan your child’s education expense well in advance you probably won’t have to make sacrifices in your lifestyle to meet the financial demands.
The tips mentioned below can help you plan your child’s education expenses strategically:
1. Estimate the numbers
Make some projections based on:
- Your child’s age
- The current cost of education
- The likely inflation
You will arrive at a ballpark figure.
2. Save early and often
Once you have the estimated costs, set up an education fund and start making contributions to it.
You can either make monthly contributions or lump sum payments. This fund will ensure that when the time comes you don’t have to break FDs or liquidate your assets.
Remember, the trick is to be disciplined with your contributions.
Even if you don’t have your child’s entire future planned, keep aside some money every month. Compound interest works like magic on money over time. Whether your child decides to get a degree in medicine or music, you’ll have a substantial amount saved up.
3. Select the right investment vehicle
Check for options in investments. Mutual funds? Child plans? Fixed deposits? PPF? Weigh the pros and cons of each investment options and choose the right one.
4. Don’t go for prestigious institutions
Getting into a prestigious university may be a matter of prestige. But it also puts a dent in the family budget.
Don’t let emotions get in the way and be too hung up on the name of the school/college/university. Look at good potential affordable options.
5. Ask your family for help
You can ask the child’s grandparents or even the rest of family to make cash contributions instead of buying gifts for birthdays and Christmas.
6. Learn how scholarships and grants work
Research online and get information about various government and non-government financial schemes.
Apply for every scholarship your child qualifies for. There are many scholarships that are awarded for things other than academic achievements, like the arts, athletics, etc.
7. Take loans
As your child gets into college, you may realize that you have not saved enough. And now you cannot afford to pay for their education. Scholarships and grants may help, but what if your child is not eligible or if they aren’t enough to cover the costs? An education loan can help bridge the gap in financing your child’s education expenses.
Most often than not, there may be some indirect education costs involved such as the living expense of your child living in another city or country for education. These costs may not be covered by a student loan for education. In that case, it makes perfect sense to consider a personal line of credit along with an education loan to ensure that the indirect education costs are covered.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at firstname.lastname@example.org.