For most Indian families, after buying a home, planning for a child’s education is often the next major financial priority for families. It represents stability, opportunity, and long-term security. However, over the past several years, the cost of education has increased steadily. In many cases, it has grown faster than annual salary increments. This gap is now becoming visible in household budgets.
Understanding education inflation
Education expenses have been rising consistently. School tuition fees, coaching classes, digital learning subscriptions, and extracurricular activities all add to the total cost. At the higher education level, professional courses such as engineering, medicine and management are significantly more expensive than they were a few years ago, particularly in private institutions. For instance, the annual tuition fee for a two-year MBA at several leading private institutions in India was typically in the range of Rs 12-15 lakh around five years ago. Today, at many of these same institutions, the total programme fee is closer to Rs 20-25 lakh.
Families must budget for accommodation, transport, books, devices and other academic expenses. These costs compound over time. What appears manageable today can become substantial over a 10 to15 year period.
Salary growth has been moderate
While incomes have grown, salary increments in many sectors have remained moderate in recent years. Urban salaried households, annual hikes often fall within mid-single digits. According to the Aon Annual Salary Increase and Turnover Survey, average salary increases in India have hovered around 9 per cent across sectors, with actual increments varying by industry and role. When education costs rise faster than income, the savings gap widens. This means families must now allocate a larger portion of their income towards education planning. What earlier required gradual savings now demands structured and early preparation.
The funding gap
When education costs outpace salary growth, families typically rely on three approaches. They increase savings, take education loans, or use funds originally meant for other goals such as retirement.
Education loans provide access, but they also create repayment responsibilities. Parents who self-fund may compromise long-term financial security. In some cases, families even consider secured borrowing options such as gold loans to meet urgent education expenses.
While such loans can offer quick liquidity, they carry risks if repayments are delayed. Careful evaluation is important before choosing this route. The financial pressure is higher for families with more than one child, especially when education cycles overlap.
Planning becomes essential
The widening gap has made early financial planning essential. Many parents now start investing in education soon after a child is born. Long-term options such as systematic investment plans (SIPs) in diversified funds are often used to gradually build a corpus. Inflation-adjusted planning is equally important. Estimating only current fees is not enough. Future costs must be projected realistically. Adequate term insurance also helps protect the child’s education goal in case of an unforeseen loss of income.
Education continues to be a necessary investment. However, rising costs and moderate salary growth have made planning more demanding. The solution is not to scale back aspirations but to prepare earlier and more carefully. With disciplined savings, realistic projections, and informed financial decisions, families can bridge the gap.
(The author is Associate Analyst, Communications, BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
