Education inflation in India runs at roughly 10-12% a year — comfortably ahead of general inflation of around 6%. That gap is the entire problem, and it is why a fixed deposit "for the child's education" reliably falls short.
What it costs now, and what it will cost
Current all-in figures, including coaching, fees, hostel and living costs:
| Path | Cost today | In 15 years @ 10% |
|---|---|---|
| IIT B.Tech (4 yrs, incl. coaching) | ₹12-15 lakh | ₹50-63 lakh |
| Private engineering college | ₹15-25 lakh | ₹63 lakh-1.04 cr |
| MBBS (private) | ₹60 lakh-1.2 cr | ₹2.5-5 cr |
| IIM MBA | ₹25-30 lakh | ₹1.04-1.25 cr |
| Undergraduate abroad (US/UK) | ₹1.2-2 cr | ₹5-8.4 cr |
Note what happens to the IIT column. The tuition itself is modest — IIT fees are subsidised — but two years of serious coaching, hostel costs and living expenses take the total well past what most parents budget. And the coaching is now often the single largest line item.
The SIP you need, by your child's age
Target: ₹55 lakh at age 18, assuming a 12% annual return on an equity-oriented portfolio.
| Child's age now | Years available | Monthly SIP | Your total contribution |
|---|---|---|---|
| 1 | 17 | ₹8,900 | ₹18.2 lakh |
| 3 | 15 | ₹11,900 | ₹21.4 lakh |
| 5 | 13 | ₹16,200 | ₹25.3 lakh |
| 8 | 10 | ₹25,600 | ₹30.7 lakh |
| 10 | 8 | ₹36,800 | ₹35.3 lakh |
| 13 | 5 | ₹70,000 | ₹42.0 lakh |
Read the last column rather than the third. Starting at age one, compounding contributes about ₹37 lakh of the ₹55 lakh target and you contribute ₹18 lakh. Starting at 13, you contribute ₹42 lakh and compounding barely helps. The cost of delay is not the higher instalment — it is that you end up funding the goal almost entirely out of your own pocket.
Where to invest, by time remaining
Education has a hard deadline. Your child turns 18 whether or not markets cooperate, so the asset mix must shift as the date approaches.
- More than 10 years: 80-90% equity. Flexi-cap and index funds as the core, mid cap as a satellite.
- 5-10 years: 60% equity, 40% debt. Begin shifting to hybrid funds.
- 3-5 years: 30% equity, 70% debt. Protecting what you have accumulated now matters more than growing it.
- Under 3 years: Debt and liquid funds only. A market fall here is not recoverable before the fees are due.
Start the shift about three years out, moving roughly a third of the corpus each year via an STP. Do not attempt it in one move on a single day.
Instruments worth considering — and one to avoid
Sukanya Samriddhi Yojana — for a daughter under 10, around 8.2% entirely tax-free with sovereign backing. Excellent as the debt component. The constraint is that withdrawal for education is capped at 50% of the balance and only after she turns 18.
PPF — 15-year tenure aligns well if opened when the child is young, and it is fully tax-free. Suitable as the stable core.
Equity mutual funds — the only realistic way to outpace 10-12% education inflation over a long horizon.
Child ULIPs and "child plans" — usually the weakest option despite the marketing. High charges, returns typically in the 4-7% range, and long lock-ins. The insurance element is better served by a term policy on the parent's life, which costs a fraction and pays far more.
The part parents forget
The single most important element of an education plan is not the SIP. It is term insurance on the earning parent, sized to include the education goal.
If you are 12 years into a 17-year plan and the income stops, the plan stops with it. A term policy that covers the full remaining education cost means the goal survives regardless. It costs a few hundred rupees a month, and it is the only part of this plan that cannot be made up later.
Some insurers offer a premium waiver rider on child plans, where the insurer continues contributions if the parent dies. If you already hold such a policy, check whether the rider is active.
A note on education loans
An education loan is a legitimate part of the plan, not a failure of it. Interest is deductible under Section 80E with no upper limit, for up to eight years. A sensible target is to fund 60-70% from your own corpus and let a loan cover the rest — the student repays it from their own earnings, which is a reasonable arrangement.
What does not work is planning for a loan to cover everything. Loan eligibility depends on the course and collateral, and the EMI arriving in your late 50s collides directly with your retirement.
Start this month
- Pick the likely path and its cost today, then inflate it at 10% to your child's age 18.
- Look up the SIP required from the table above.
- If it is unaffordable, start with what you can and switch on a 10% annual step-up.
- Buy or top up term cover to include the full education goal.
- Review once a year, and begin de-risking three years before the money is needed.
Our education planning calculator will run this for your child's exact age and target course.
