Millions of Indian parents are literally paying the price for country’ appalling education set up. According to a report of National Sample Survey Office (NSSO), the average annual private expenditure incurred towards general education (from primary level to post graduation and above) has grown by 175% to Rs6,788 per head during 2008 -14. Alongside, the annual cost of higher education has jumped by a massive 96% to Rs62,841 per student. A majority of these surveyed households, both rural and urban are spending a major portion of their money on education, and about a quarter of these students chose to take private tuitions, signalling the poor state of India’s education system.
Public spending on education in India accounts for as low as 4.6% of government expenditure, thus, compelling Indian parents to shell out large sums of money to provide a decent education to their children.
Global Trends on Education Costs
Globally too, the costs of education have been on the rise. The costs of a university education are rising at levels higher than inflation rates. According to a 2013 study conducted by Canadian Centre for Alternative Policies, average tuition fee has increased from $1,464 to $6,348 in the last two decades. Even if inflation is taken into account, prices have tripled.
These increasing education costs can be attributed to the following reasons:
Education Austerity: The cost of higher education is rising faster than the revenues being generated. As a result, there is a larger trend towards government education austerity that has led to severe influx of private educational institutions which charge hefty tuition fees. In India, private universities like Jindal, Ashoka and even Manipal provide quality education, but at a cost.
Technology: The deployment of technology in university spaces is adding to costs than reducing it, and these costs, subsequently, are weighing heavy on the parents’ wallets in the form of students tuition fees.
Competition for Education Rankings: Competing for better education rankings by institutions often lead to higher costs to attract students. Strengthening the reputation is a major concern for these universities. Alumni have a strong interest in their university’s ranking and would donate more to further it. Subsequently, higher educational institutions with good rankings charge high costs for their courses, and students are left with no option but to pay such high prices for the sake of admission into a good university.
Demand for faculty: There is high demand for knowledgeable and renowned faculty with high salaries in an extremely labour intensive education industry where capital can’t substitute for labour. This increase in capital has led to a steep rise in education costs that are passed onto the parents.
Educational spending is an essential cost. Most Indian parents dream of getting their children into top Indian educational institutions like IITs, IIMs, NITs and Central universities, and if their luck is tough enough, compromise is not even an option for these parents. They’d still aim to send their children abroad for overseas education by taking a loan on collateral. So, the only option left to meet the rising education expenses is to save and invest, and be prepared for the above possibilities 10-11 years hence.
Invest in such a way that the money earns inflation-plus returns and the goal is to maximise these returns. Since there is time on your side, say 1o ten years from now, investing in equities like mutual funds is a profitable idea. Historical trend has shown that equity has the potential to deliver above-inflation returns in the long term. Moreover, it will be tax-free returns if you hold for that long. You can always switch to a less volatile security closer to when you need the money. Also, it is recommended to invest in mutual funds from trusted online platforms like Finserv MARKETS, before buying the right ones.
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An Uphill Climb Ahead
Children’ education is always a top financial priority for every parent. Most experts believe the education inflation is on the higher double-digit. Thankfully, Indians too understand that the higher education costs will skyrocket in coming years. So, it makes immense sense to plan for it, and what better way than to invest in mutual funds.
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