Importance of Smart Financial Planning for Child Education

Education is an imperative instrument for the growth of a country's economy, generating awareness, and creating a better environment overall. A well-educated population, equipped with the appropriate knowledge, proficiency, and expertise, is essential for the economic and social development of a country. The education sector has a massive responsibility in shaping the future of a nation.

Demographic Trends and the Need for Higher Education

In 2011, around 50% of our population was less than 24 years of age. Today, around two-thirds of our population is in the working age group (15-64 years). Over the next two decades, the working population in India is expected to rise, and quality higher education could be one of the important factors in the growth of our economy.

The Role of Parents in Financing Higher Education

The median age of India is 28.4 years, which means the majority of the country comprises young students and youth. Indian parents are increasingly inclined towards providing their children with higher and quality education and are ready to spend substantial sums, even at the cost of sacrificing their retirement plans.

According to the report titled "The Value of Education, the Price of Success" by HSBC, the cost of higher education is being financed by parents who often sacrifice personal time to earn the extra money needed to send their children to university. The study revealed that one in two parents take up a second job or work extra hours to gather the necessary funds.

HSBC polled 10,478 parents and 1,507 university students across 15 countries and territories. The findings were based on a sample of parents with at least one child aged 23 years or younger currently pursuing degree courses and on a sample of students aged 18 to 34 in university undergraduate or postgraduate education.

"69% of students believe that higher education leads to better opportunities to secure a first job, 56% think it provides better job prospects throughout their career, and 53% believe university education aids in faster career progression and higher earnings."

Perceptions on the Value of Higher Education

According to the report, 71% of parents and 82% of students agree that despite the significant costs and sacrifices involved in studying at university, it is a worthwhile investment. Additionally, 69% of students believe that higher education leads to better opportunities to secure a first job, 56% think it provides better job prospects throughout their career, and 53% believe university education aids in faster career progression and higher earnings.

Financial Challenges Faced by Indian Parents and Students

Research by ET Online indicates that Indian parents spend an average of Rs 30 lakh on their child's schooling between ages 3 to 17. The cost of college education ranges between Rs 8 lakhs to Rs 45 lakhs depending on the chosen program. Additional expenses such as coaching or entrance preparation fees, accommodation, transport, laptops, and textbooks also contribute to the financial burden.

To fill this gap, parents often resort to education loans, extra work hours, or borrowing from friends and relatives. Students also face the challenge of balancing work and study due to financial constraints, spending an average of 2.5 hours in paid employment daily instead of studying.

Importance of Financial Planning for Education

The study findings indicate that 48% of parents wish they had started saving for their child's education earlier, 59% worry about their financial resources to support their child's education, and 40% wish they had saved more regularly. It is crucial for parents to realize the importance of planning their finances well to easily fund their child's education without feeling extra pressure. A proactive education plan and seeking advice from professional financial advisors can ensure better financial outcomes for both parents and students.

The pursuit of higher education is an essential investment that yields significant long-term benefits. As India continues to grow, quality education becomes even more critical. Parents, pivotal players in this journey, make substantial financial sacrifices to ensure their children get the best possible education. By adopting smart financial planning and seeking professional advice, families can better navigate the financial challenges associated with higher education, ultimately paving the way for a brighter and more prosperous future for their children.