Educating Your Child Will Cost You Rs 42 Million

In pure arithmetic terms, are you better off saving that money and handing over a fixed deposit to your child after 22 years?

Maheshwer Peri

Updated on: 22 September 2014 12:00 am

Are you planning for your child's education? If your three- year-old baby is getting into a play school in 2015 (which has become necessary for admission in schools), you will be spending close to Rs.42 million on education alone. This is when he/she will study in government funded/aided schools and colleges. The fees component alone is Rs. 31 million and another 11 million would be incidental costs (transportation, books etc.) on education alone.

To know how, read on.

The Return on Investment (ROI) in a student in India is abysmal. As a prudent financial practice, it is no longer viable to fund your education with loans. Successful examples are like a lottery with odds of better ROI heavily loaded against you.

Costs of education have galloped to catch up with the west while the output measured as salary, employability and knowledge haven't kept pace. Most MBAs are placed at a salary of less than 4 lacs/pa (if at all they are placed). Three quarters of engineers don't get a job after passing out.

So, in pure arithmetic terms, are you better off saving that money and handing over a fixed deposit to your child after 22 years? Imagine a Rs.42 Million fixed deposit to secure your child's future. In the interim, s he can study in a good government school (as many of us did), understand the real world, devoid of protection and enjoy her childhood and maybe pursue dreams and her passion instead of competing in the rat race. Does it make sense? No tensions of marks, grades, courses, coaching, tuition, placements, interviews. Live your childhood, get tougher, pursue your dreams and save close to Rs.42 million. IMAGINE.

The major assumptions are:

Return on capital employed is assumed at 11%.
School Fees for past years is actuals. For 2015, it is as of today.
The fees are of a school built on government grants and where fees is decided by parents and school together. Pure private education is 100% more.
For higher education, the fees are twice of what they are today in IITs and IIMs; That means doubling in 15 years. And Good Private engineering colleges fees are typically 2.5 times of IITs.
The period of education from pre-school to PG is assumed as 21 years + one year for job placement.
A fees inflation of 7% is assumed. In reality, it is more than 10%.
Other costs are assumed at 35% of fees (transportation, books other fees etc). In many places, the other costs are as much as the total fees (100%).
Tuition assumed for 3 years only of the 22 years. No coaching is assumed for UG entry while one year coaching is assumed for PG admission tests (CAT etc). Many students have tuitions through the life cycle. And most students go through coaching at UG level too.