A college programme that costs $80,000 today will cost roughly $320,000 by the time your newborn turns 18 — at 8% education inflation, prices quadruple. The good news: 18 years of compounding can fully cover it with about $525/month in equity SIPs at 11% expected return. The earlier you start, the smaller the SIP — and the more compounding does the work.
Use-case → Child Education
SIP for Child’s Education in 18 Years
The exact monthly SIP to fund your child’s college — accounting for the brutal reality of education inflation.
Required monthly SIP
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Why Education Inflation Is So Brutal
Education inflation outpaces general inflation in nearly every country. Driven by rising faculty salaries, infrastructure investment, demand outpacing supply at top institutions, and shrinking government subsidies. Recent data:
- US college tuition: ~6.5% annual increase over 30 years.
- Indian engineering / medical (premium institutions): 10–12% annual.
- UK university fees: 5–7% annual.
- US private K-12: 4–6% annual.
- Plan with 7–10% education inflation, even if general inflation is only 3–5%.
Investment Strategy by Time Horizon
- 10+ years away: 80–100% equity (index funds, large/multi-cap MF). Time absorbs volatility.
- 5–10 years away: 60–70% equity, 30–40% debt. Begin shifting toward stability.
- 2–5 years away: 30–50% equity, 50–70% debt. Capital preservation becomes critical.
- 0–2 years away: Mostly fixed deposits / liquid funds. Don’t risk a 30% market drop right when tuition is due.
The Power of Starting Early
| Child Age When You Start | Required Monthly SIP | Total Out of Pocket |
|---|---|---|
| 0 (newborn) | $525 | $113,400 |
| 3 | $753 | $135,540 |
| 6 | $1,121 | $161,424 |
| 10 | $1,966 | $188,736 |
| 14 | $5,000+ | $240,000+ |
Same goal, same expected return. Each year you delay roughly doubles the burn rate. Start the day the child is born; ideally start the day you’re married.
Backstops If You Fall Short
- Education loans — low rates, deferred repayment, tax-deductible interest. Combine with savings for 70/30 funded/loan split.
- Scholarships and merit-based aid — start preparing 2–3 years before application.
- In-state / public university — saves 50–70% vs private/Ivy League with similar career outcomes for most fields.
- Working summers — can cover books, fees, partial tuition.
- Community college transfer — first 2 years at a fraction of the cost, then transfer to 4-year institution.
Frequently Asked Questions
Should I use a 529 / Sukanya Samriddhi / RESP?▾
Should I plan for international university?▾
How do I plan for two or three children?▾
Should I prioritise retirement or child’s education?▾
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