Why a Child Education Plan is Essential for Rising Education Costs?

Providing a great education for your child is growing more expensive. With growing tuition, extracurricular activity expenditures, and other educational expenses, parents must start planning early. 

A well-structured child education plan will help you stay financially prepared for these expenses, ensuring that your kid's future is safe regardless of inflation or unanticipated situations. 

Have you ever considered what might happen if you were caught off guard by a sudden financial crisis or life event? That is when a strong educational strategy comes into play.

Here are detailed reasons why a child education plan is essential to manage rising education costs:

1. Soaring educational fees

The cost of education is rising rapidly, with many prestigious institutions charging exorbitant fees. Education has turned out to be one of the biggest expenses for families with private schools charging lakhs for admission and undergraduate and postgraduate programs. These costs can, however, overwhelm your household budget without a pre-planned strategy. 

A child education plan is a plan that allows you to start saving early so that you have enough money to finance your child’s education when the time arises. With this, you don’t have to take out loans or liquidate other investments to pay these expenses.

2. Inflation in the education sector

The education sector has high inflation. About 10-12 per cent of the costs for school supplies, books and fees go up each year, well beyond the traditional rate of inflation. What that means is by the time your child is ready to go to higher education, tuition costs may have doubled or tripled. 

This is fought with a child education plan that invests your money in instruments which grow at a rate equal to or more than the rate of inflation, thus ensuring your savings march with rising educational expenses.

3. Comprehensive coverage with a term plan

Many child education plans come bundled with a term plan, providing life insurance coverage. This ensures that if something unfortunate happens to the earning parent, the child’s education isn’t disrupted. The insurance payout can be used to fund their schooling and college fees. Having a term plan along with your education plan means that your child’s future is protected even in the most challenging circumstances. This acts as a safety net and gives you peace of mind that your education is secured no matter what.

4. Tax benefits under section 80C

Tax benefits are one of the biggest advantages of a child education plan in India. If you take a plan under these plans, then you can get deductions of up to ₹ 1.5 lakhs per year under Section 80C of the Income Tax Act. 

It means you can reduce your taxable income and save on taxes, at the same time making sure that your child’s educational needs are taken care of. There may also be some policies which offer additional tax savings under Section 10(10D) on the maturity proceeds or death benefits.

5. Financial discipline

A child education plan is a strategy that encourages parents to be disciplined and consistent with their savings. It transforms education funding into a long-term goal, allowing you to regularly invest small amounts of money over time. 

This approach alleviates the pressure of having to save large sums at the last minute when your child is ready for school or college. Not only does it secure your child’s future, but it also teaches your child how to develop a healthy savings habit that can be applied to other financial goals.

6. Stress-free higher education

The dream of sending your child to medical school, an IIT, or a top global university comes with substantial financial obligations. If you have to go to an engineering college or an MBA in some reputed institution, education can cost lakhs or even crores of rupees for you. 

A plan can be put together around an education budget, which can help you to save steadily and to be ready when your child is ready for higher education. It takes the stress and anxiety out of the way on how you will cover these steep costs, so your child can now go forth and follow their dreams. 

7. Customisable plans

Not all families have the same financial capacity or goals, child education plans allow them to tailor the education tool to their needs. They can be further tailored to fit your risk appetite, the amount of money you want to invest, and the time frame for which you expect the money. You can customise the plan to fit your expectation of returns (higher if you opt for equity-based plans or comparatively safer if you seek debt options) or your timelines.

8. Protection against unexpected events

Life is full of uncertainties and any financial planning has to take into account unexpected events. Many of the policies that provide the added benefit of coverage in case of critical illness or accidental death also have a child education plan. 

This means that even in the worst of cases your child will not be deprived of education because of financial incapability. It becomes even more important when education costs can break the family’s budget if not accounted for.

9. Building a corpus for expensive degrees

A degree in specialisation like an MBA, medicine or engineering can cost several lakhs or even crores of rupees. Most of these degrees usually come with very high tuition fees and so many parents are left with no option but to go for student loans. 

By beginning early with a child education plan, you may develop a considerable corpus that will be available when your kid begins their degree, allowing you to avoid or reduce student loans, which can result in long-term debt for your child.

Ending note

Given escalating education expenses, a child education plan is more than simply a financial instrument; it serves as a safety net for your kid's future. Term plans provide the twin benefits of savings and insurance, ensuring your child's education is safe even in the face of inflation and unforeseen circumstances. 

These plans are a vital element of any parent's financial planning due to their tax benefits, adjustable features, and flexible withdrawal options. Investing early reduces the danger of relying on loans, gives your kid greater choice in choosing a professional path, and provides you with peace of mind.