As parents, we want to provide the best for our children. Overseas education is perhaps right up there in the list of things we aspire for our children – some would go as far as putting this goal ahead of retirement planning. While an overseas degree is much sought after considering the placement prospects and the ability to earn in dollars, the cost of studying abroad is steep. Typically, 10 – 15 times more than what it would otherwise cost in India. Given this, early planning is the first step in achieving your dream of providing international exposure and education for your child. However, you would do well to keep in mind that the educational expenses are influenced by factors outside of your control such as inflation, currency fluctuations, etc. Let us look at the factors to consider while accumulating a corpus for your child’s education.
Factors to consider:
The amount of corpus: The amount of corpus you should aim for depends on several factors including the type of education, the country of choice, under-graduate or post-graduate course, etc. That coupled with the fact that we are estimating the cost of education in a foreign currency and in a different country 15 – 18 years hence makes it even trickier. For instance, Rs.20 lakhs today equals to Rs.85 lakhs 15 years hence considering an inflation rate of 10%. Now, if you have to shield the corpus against currency fluctuation and other factors, the corpus you should aim to build should increase substantially. An under-graduate course can cost between 20 – 55 lakhs as of today. Notice the wide gap. The cost variation is owing to the stream of education, the university/college one seeks admission in, the target country, etc.
Currency Fluctuation: Universities abroad accept fees in USD or in the local currency. The rupee has depreciated significantly against the dollar over the past 24 months – from around Rs.45 two years ago to around Rs.65 today. To understand the impact better, you will end up paying Rs.2 lakh more for every $1,000, should you enroll your child for a course this year versus two years ago. This outgo is greater than the impact inflation would have had over a two year period.
Inflation: We have discussed this earlier. You will need to consider this from the point of view of fringe expenses, travel and other overheads besides the yearly rise in the fee structure.
Tuition: A big chunk of the educational cost can be absorbed if scholarship is awarded to your child. However, lowering your corpus target by factoring in scholarship is not an accurate method of arriving at the targeted figure.
Travel expenses:Travel expenses take a fairly large part of the educational expenses pie. Some universities have a trimester system wherein students return home at the end of each term. And if the closure of the term coincides with peak vacation season, airfares will not be available at a discount. Also, if you intend to visit your child at their country of study, you will have to factor in those travel expenses as well. Further, students are required to travel locally, for projects, internships, interviews, etc. Given all these aspects, travel expenses can set you back by quite a bit, if not accounted for.
While most universities offer health insurance at an additional cost, not availing a health plan can set you back by quite a bit considering the high cost of treatment in western countries. Therefore, you will have to factor in the health insurance cost
as part of the total expenses planned for.
Miscellaneous Expenses: Unaccounted expenses crop up from time-to-time taking the overall expenses higher than planned for. Typically, miscellaneous expenses account for 5 – 10% of the overall expenses depending on how mindful one is of their expenses. Miscellaneous expenses could include mobile phone bills, project related expenses, books, etc.
Clearly, overseas education is an expensive affair. If you are undeterred by the exorbitant costs involved in overseas education and aspire to provide your child education abroad, you will do well to plan ahead. Give yourself a time-range of 15 – 18 years. With a head-start and a clear financial goal in mind, your task of attaining the same becomes easier with an education plan that can help meet these needs.