However, with a steep rise in education costs within India as well as abroad, it has become important for parents to save more and more to financially secure the future educational needs of their children. One way that parents can improve their chances of saving enough for their children’s education is by starting early. There are many ways in which starting early can help you save for your child’s higher education with ease.
Child education planning typically involves creating a comprehensive financial plan that is primarily designed to ensure that future cost of the child education can be met. While there are multiple ways in which parents can ensure sufficient funding for their children’s higher education, one thing often gets missed - the importance of starting early.
Read on to find out key reasons why early child education planning matters:
- Helps Plan Your Target Corpus by Factoring in Inflation
- Helps Maximise Compounding Benefits
- Ensures Access to a wider range of investment options
- Reduces reliance on debt
Helps Plan Your Target Corpus by Factoring in Inflation
To understand how this can impact the corpus you need to save for your child’s higher education, let’s put some numbers to it. For starters, let’s assume that your child is currently 5 years old and you estimate that the child’s higher education will start at the age of 18 years. This means you have 13 years to save for your child’s higher education. This is when you have to account for inflation to set yourself a savings target.
Let’s assume the cost of a B.Tech degree at a government college is ₹16 lakh today. Assuming 7% average annual inflation, the cost of the same course will be around ₹39 lakh after 13 years. Similarly, assuming 10% average annual inflation, you will need to target a corpus of around ₹55 lakh after 13 years.
However, there is no guarantee that your child will be able to get admission in a government college. So you also need to plan for the possibility of a more expensive private college education.
Let’s assume that the cost of the same course in a private college is ₹30 lakh. This same course will cost around ₹1.04 crore after 13 years assuming an average annual inflation rate of 10%. On the other hand, if education inflation rate in a private college is around 15%, the course fee you have to plan for 13 years down the line is around ₹1.85 crore.
So, on the safer side, you need to plan for the highest of these amounts to reduce the risk that a lack of funds prevents your child from accessing the best possible higher educational opportunities. So, by starting early, you can define the financial goal clearly early on and get a head start on planning how to reach it.
Did You Know: Inflation reduces the ability of your fixed return investments to grow your wealth over time. This is because, the real rate of return from fixed return instruments get reduced due to inflation. As a result, in the long term, fixed return instruments tend to be less beneficial for investors compared to potentially inflation beating investments such as equities.
Helps Maximise Compounding Benefits
If you start investing early towards creating an education corpus for your child, you can potentially maximise the power of compounding. This is because,compounding works best when you give your money more time to grow.
For instance, watch the way a monthly investment of ₹25,000 with time assuming an average annual return of 12% on your investment:
| Investment Period (Years) | Total Amount Invested (₹) | Total Returns (₹) | Corpus at Maturity (₹) |
|---|---|---|---|
| 2 Years | 6 lakh | 76,624 | 6.77 lakh |
| 4 Years | 12 lakh | 3.25 lakh | 15.25 lakh |
| 8 Years | 24 lakh | 15.26 lakh | 39.26 lakh |
| 10 Years | 30 lakh | 26 lakh | 56 lakh |
| 12 Years | 36 lakh | 41 lakh | 77 lakh |
| 15 Years | 45 lakh | 73.98 lakh | 1.19 crore |
Source: https://www.advisorkhoj.com/mutual-funds-research/top-performing-systematic-investment-plan. All data as of July 1, 2026.Returns data shown above is for total returns variant of the respective indices.
As you can see, in the case of higher risk investment options such as midcap and smallcap stocks, the long term historical returns have been higher. While, the returns have been slightly lower for less risky options such as large cap stocks.There are different ways to make such equity investments, e.g. direct stock investments, equity mutual funds, equity ULIP funds, equity-oriented child plans,Index Funds, etc.
However, if you need the money soon i.e. within the next 5 years, you do not have the option of taking such risks. That’s why if you plan to withdraw your child education funds corpus relatively soon, you should opt for relatively less volatile and higher liquidity investment plans.
Some examples of such plans are fixed income instruments such as fixed deposits, recurring deposits, capital guarantee plans, etc. While these are excellent instruments for capital preservation especially with respect to short-term volatility, they cannot match the returns potential of equities in the long term.
Did You Know: Sukanya Samriddhi Account balance cannot be fully withdrawn in order to fund a girl child’s education. Only a partial withdrawal is allowed after the girl child attains the age of 18 years for the purpose of education. Complete withdrawal is only allowed in case of the girl child’s marriage on or after attaining the 18 years. Alternatively, full withdrawal is also permitted at maturity after the girl child attains the age of 21 years.
Ensures Access to a Broader Range of Investment Options
Another benefit of early child education expenses planning is the access to a wider range of investment options. One key reason for this is that if you are investing for the long term, it potentially allows you to pursue wealth creation aggressively by investing in high risk investments such as equities.
Now, obviously equities have a high degree of risk associated with them and they can be quite volatile in the short-term. But in the long-term such as an investment period of 10 years or longer, the return potential of equity investments is unmatched.
This is what a 15 year systematic investment of ₹25,000 per month i.e. a SIP investment of ₹45 lakh started in 1 July 2011 would look like on 1 July 2026, in the case of different equity indices:
| Index Name | Historical CAGR Returns (%) | Corpus at Maturity (₹) |
|---|---|---|
| Nifty 100 TRI | 12.66 | 1.25 crore |
| Nifty 500 TRI | 13.87 | 1.38 crore |
| Nifty Large Midcap 250 TRI | 15.91 | 1.65 crore |
| Nifty Smallcap 250 TRI | 16.88 | 1.79 crore |
| Nifty Midcap 150 TRI | 18.96 | 2.15 crore |
Source: https://www.advisorkhoj.com/mutual-funds-research/top-performing-systematic-investment-plan. All data as of July 1, 2026.Returns data shown above is for total returns variant of the respective indices.
As you can see, in the case of higher risk investment options such as midcap and smallcap stocks, the long term historical returns have been higher. While, the returns have been slightly lower for less risky options such as large cap stocks.There are different ways to make such equity investments, e.g. direct stock investments, equity mutual funds, equity ULIP funds, equity-oriented child plans,Index Funds, etc.
However, if you need the money soon i.e. within the next 5 years, you do not have the option of taking such risks. That’s why if you plan to withdraw your child education funds corpus relatively soon, you should opt for relatively less volatile and higher liquidity investment plans.
Some examples of such plans are fixed income instruments such as fixed deposits, recurring deposits, capital guarantee plans, etc. While these are excellent instruments for capital preservation especially with respect to short-term volatility, they cannot match the returns potential of equities in the long term.
Did You Know: Sukanya Samriddhi Account balance cannot be fully withdrawn in order to fund a girl child’s education. Only a partial withdrawal is allowed after the girl child attains the age of 18 years for the purpose of education. Complete withdrawal is only allowed in case of the girl child’s marriage on or after attaining the 18 years. Alternatively, full withdrawal is also permitted at maturity after the girl child attains the age of 21 years.
Reduces Reliance on Debt
If you start saving for your child’s education early, you are more likely to reach your target corpus. This means that the possibility of having to take on debt such an educational loan, loan against property or personal loan to fund your child’s education is significantly reduced. This can be a boon as you do not have to pay the accrued interest on these loans.
To understand how much an education loan can cost you over time, let’s crunch some numbers. Suppose you take on a 15 lakh loan to fund your child’s higher education. This loan carries an interest rate of 9.5% p.a. and you plan to pay off the loan in 7 years. Your EMI payments for this loan would be ₹24,134 over the next 7 years. This means you will have to pay the lender ₹20.27 lakh to repay the loan. The total interest payable for the loan will be ₹5.27 lakh for the ₹15 lakh loan.
Did You Know: Only the interest component of an education loan’s repayment offers tax deduction benefits. So extending your education loan repayment to the maximum tenure offers only limited tax benefits. Moreover, this benefit is not available to taxpayers opting for the new tax regime.
