The National Sample Survey Office (NSSO), in one of its recent reports, stated that between 2008 and 2014, the annual private expenditure for general education (primary, secondary, graduation and post graduation) increased by a stunning 175%. During the same period, the cost of technical and professional education rose by 96%. These expenses include tuition fees, books, coaching and other related expenditure.
As per these numbers, the annual education inflation is in the range of 10-12% which is a lot more than the general inflation figures of 7-9% during the same period.el This means that if the current cost of doing an MBA from a private institute is Rs. 30 lakhs spread over two years, the same would cost Rs. 78 lakhs to 93 lakhs assuming 10% to 12% inflation, respectively 10 years down the line. Therefore, a parent should keep a target of accumulating at least Rs. 90 lakhs for their child’s MBA 10 years from now.
Keeping this in mind, one should have a proper plan in place for their children’s higher education – such as target amount to be accumulated, the monthly amount to be saved to achieve the target, etc. To beat inflation, especially education inflation, one has to invest maximum amount in direct equity and equity linked instruments such as mutual funds or children’s unit linked insurance plans (ULIPs). To add a touch of safety to the child’s education portfolio one could also invest in public provident fund (PPF) and bank fixed deposits.
When we talk about investing in mutual fund from the perspective of growth, we would include Equity Oriented balanced funds, Large cap Funds, Diversified Funds, Mid & Small Cap Funds, Equity Linked Savings Scheme (ELSS) etc.