Why should one start planning for his/her child’s education from early on?
Previously education costs were affordable. Investments in fixed income securities like PPF and NSC could help parents meet education expenses of their children. In the recent years education costs have soared up like anything. If we consider education cost inflation at 10% every year, an MBA Course that costs Rs 4,00,000 today will cost a whopping Rs 10.37 Lacs 10 years down the line.
Falling Interest Rates:
Interest rates on fixed income securities have fallen. Till about some years back the rate of return on NSC and PPF was 12%. Today it stands at 8%. This has come down by one third (33%). Previously if a person invested Rs 25,000 every year in a PPF account at 12% for 20 years he would have roughly Rs 20.17 Lacs in 20 years. But today at 8% returns the same investment of Rs 25000 every year will yield only Rs 12.35 Lacs after 20 years. A fall of roughly Rs 8 Lacs.