As a matter of fact, Dr Shastri is not alone. There are many of us in similar situations with similar dreams for our children. Giving our child the best possible education is always our first priority. Why not? However, clarity of goal does not ensure its completion.
The fundamental question is whether we are aware of what it will really cost to realise this goal, and whether we have a structured plan to manage all the cash flow demands as and when they are likely to accrue.
These and other such fundamental issues arise because we tend to manage education funding as and when it accrues. We don't plan for it in advance. We tend to think that we will manage it when the requirement calls for providing education funds. While most of us tend to buy insurance policies or invest in bonds or some mutual fund schemes to fund child’s education requirements, it is often inadequate.
We don't realise because most of us never really get into the mathematics. Our parents did not need to plan as education was generally inexpensive to be given such high importance but the times are very different today.
When the demand for money actually accrues, many of us may get confused or stressed on how to raise resources, and so, we tend to break fixed deposits or withdraw from PPF accounts or take loans on against PF accounts or sell other good investments. Such actions may take care of education needs in the short term but in the long term we have generally speaking eroded other assets. The impact of which will be seen only a few years later.
Education funding demands may also entail making compromises on our other goals, be it purchase of a house, retirement funding or holidays. We generally tend to delay other requirements and let education needs take precedence over all other planning needs. It can put our entire financial resources out of gear as education costs have a much higher rate of inflation.
Such erratic decisions not only eat into all our savings and investments but may also compel us to take loans and thus jeopardize our future cashflows. The worst is the fact that we are totally unprepared and thoroughly confused as to how to fund such needs.
Today, unfortunately, we do not have any mechanism, service or product that can TOTALLY manage all the fund flows during the entire time span of the child’s education. Hence another lesson to be learnt is that no insurance policy, child plans, mutual fund schemes alone can fulfil all the requirements for creating an effective education funding plan.
A thorough and well crafted Education Funding Plan is the most rational thing to do. If not, either the child may need to sacrifice his/her education & career aspirations or we may have to compromise on many of our other goals.
Also read: Should I buy child ULIP for my child?
Next page: Conclusion
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