In one of the famous dialogues from the 2011 Bollywood movie, Aarakshan, a corrupt teacher portrayed by Manoj Bajpayee tells Amitabh Bachchan, “There is no bigger business than education.” Fast forward to 2016 and those words look like a true reflection of the current situation in the country.
According to a report published by the National Sample Survey office, the average annual private expenditure for general education, i.e., from primary level to post graduation, had increased by 175% to Rs. 6,788 per student between 2008 and 2014. In the same period, the cost of technical and professional education shot up by 96% to Rs. 62, 841 per student.
As many as 25% of the total kids in the country were reported to be taking private education, which accounted for 15% of the total spending. In a major city like Delhi, the cost almost tripled in this period making it very tough for the common Indian to afford.
Why are the rates rising?
The focus still clearly seems to be on providing bookish knowledge, rather than to enhance skills.
Most Indian parents believe that getting their kid into a good school or college will eventually land them a good job. In the process, the skill development part is being neglected and the educational institutes are benefiting from the situation.
Another important thing is that quality education in government-run schools is very poor. An education report that assessed government schools revealed that 20% of the surveyed children from Class 2 didn’t recognize numbers between one and nine and only 25% of them from Class 3 could subtract.
This leaves the parents with no other option but to seek the help of private schooling bodies. The situation is even worse when it comes to higher education. In 2016, the annual fee of an undergraduate programme in India’s premium institute, IIT, increased from Rs. 90,000 per annum to Rs. 2 lakh per annum.
A two-year diploma course from IIM Ahmedabad now costs Rs. 19.5 lakhs, instead of the Rs. 18.5 lakh people paid a year ago. The increasing population has also led to the demand for more institutions and the construction costs once again come from the already set up bodies.
How to meet your needs
This brings us to the real question, “How do you raise funds to meet such huge financial needs?” There are a plethora of investment options from mutual funds to terms plans that one can choose from. Here are the best investments you can make:
Sukanya Samriddhi Scheme
This is an initiative by the Government of India to promote the idea of saving for the girl child. Under this scheme, you can open an account from the time of the birth of the child till she turns 10 and investt a yearly amount anywhere between Rs. 1,000 and Rs. 1.5 lakhs.
The deposit can be made for 14 years and the maturity period is 21 years from the time of opening of the account. The interest rate is 9.2% and the return can be used for higher education as well as for marriage purposes. It also makes you eligible for tax redemption under section 80C of the Income Tax Act.
Investment in Gold
In India, investment is never complete without holding some physical gold, and the reason is obvious – the price of gold always increases. The better way is to invest through ETFs, gold mutual funds or E Gold, since they save you from the cost and risk of holding physical gold.
If you have gold investments, your burden for a marriage will be less and you will be able to spend more freely on the education of your child.
Term Insurance Plans
Unlike the other plans on the list, a term plan ensures good education and future security for your child even in your absence. If your work requires too much of travelling and has some sort of risk associated with it, then it is better to invest in such plans.
Such policies provide financial cover for a certain time frame and in case of any unfortunate event during this period, your family gets the benefits. The advantage it offers is that the amount of premium is not very high, which means you can invest in a term plan, alongside your other investments.
Equity Mutual Funds
It should be on the top of your priority list because of the longer time period (10-15 years) and the mode of investment. SIPs, which are gaining popularity very fast are quite affordable too. A monthly SIP of Rs. 5,000 for a period of 18 years can get you about Rs. 33 lakhs at the end of the tenure, which can be used for the education of your child as well as for other purposes.
If you are unable to match the amount needed despite these investments, then you have the option of taking an education loan as well.
Apart from these, spending time in enhancing the skills of your child is a good idea because they will get the best benefits from seeing the application of knowledge in real life situations.
Featured image source: Digital Learning