Child Education Planning: How Much to Save and Where

To plan for your child's education, estimate today's cost of the course, grow it by an education inflation rate for the years left, then invest monthly in a mix of equity mutual funds and safe options such as PPF or Sukanya Samriddhi. As an illustration, a ₹20 lakh course today could cost about ₹63 lakh in 15 years, needing a SIP of about ₹12,600 to ₹15,200 a month. Start early, and move money to safety in the last three to five years.

Step 1: Estimate today's cost

Pick a realistic target, not a vague one. Look up current total cost, including tuition, hostel, books and living expenses:

These ranges are broad illustrations. Fees vary widely between government and private institutions and by city. Use the actual fee page of two or three colleges you have in mind.

Step 2: Adjust for education inflation

Fees have usually risen faster than consumer prices. Many planners use 8% to 10% a year. The formula is:

Future cost = Today's cost × (1 + inflation)^years

All figures are illustrative projections. For how inflation erodes savings more generally, see inflation impact on savings.

Step 3: Work out the monthly investment

Divide the future cost by what ₹1 a month grows to over the period at your assumed return. A worked case makes this clearer.

Worked example (illustrative)

Meera and Arjun's son is 3. They want ₹20 lakh in today's money for an engineering or management degree in 15 years.

• Future cost at 8% inflation: ₹20,00,000 × 1.08^15 = ₹20,00,000 × 3.172 = ₹63.44 lakh
• SIP needed, investing at the start of each month for 15 years (180 months):
  • At an assumed 12% a year: about ₹12,600 a month
  • At an assumed 10% a year: about ₹15,200 a month
• Check: ₹13,000 a month at 12% for 15 years grows to about ₹65.6 lakh using FV = P × [((1 + i)^n − 1) / i] × (1 + i), with i = 1% a month and n = 180. That covers the target.

These returns are assumptions, not guarantees. Equity funds can fall sharply in any given year. Try other amounts in the SIP calculator, and read SIP of ₹5,000 or ₹10,000 per month for what different SIP sizes can build.

A step-up SIP, raising the amount by 10% each year as income grows, lowers the starting amount needed.

Step 4: Choose the right mix of products

Sukanya Samriddhi Yojana (SSY). For a girl under 10, with up to two accounts per family (more for twins or triplets). Deposit ₹250 to ₹1.5 lakh a year for 15 years; the account matures 21 years after opening. Up to 50% of the balance can be withdrawn once she turns 18 or passes Class 10, for education. Illustration: ₹1.5 lakh a year for 15 years at a constant 8.2% grows to about ₹72 lakh at maturity in year 21, though the rate is reset every quarter.

NPS Vatsalya. A pension account opened by a parent for a minor, with a minimum of ₹250 a year after PFRDA's revised guidelines in 2026. Partial withdrawals for education are limited to 25% of contributions after three years. At 18 the child can continue in NPS or exit under the exit rules. See EPF vs PPF vs NPS for how NPS works.

Step 5: Shift to safety before the goal

Three to five years before fees are due, start moving the equity portion into debt funds, FDs or an FD ladder, in stages. A market fall in the year your child joins college can otherwise wipe out years of gains. Our FD ladder guide shows how to stagger deposits so money matures each semester.

Protect the plan

• Term insurance: If a parent dies, the SIPs stop. A term plan sized to cover the education goal keeps the plan alive. See how much term insurance cover you need.
• Separate the goal: Hold education money in its own folio or account so it is not spent on other needs.
• Review yearly: Recheck fees, returns and your SIP each year.

Planning for two children or two goals

If you have two children a few years apart, treat each as a separate goal with its own target year, SIP and glide path. Do not pool them; the older child's money will need to move to safety while the younger child's money still needs equity growth. The same applies if you plan for both a graduation and a postgraduate degree. Give priority to your own retirement savings alongside these goals: there are loans for education but none for retirement. Our guide on how much money you need to retire helps size that goal.

Mistakes to avoid

• Saving without a number. "Some money for college" usually ends up too little.
• Using today's fees. Ignoring inflation can leave you short by half or more.
• Staying fully in equity until the last year. One bad year can push the goal back.
• Mixing education money with other savings. It gets spent on cars, holidays or home upgrades.
• Buying child plans for the "guaranteed" label. Compare the actual return after charges with PPF or SSY.
• Forgetting tax. Equity gains above ₹1.25 lakh a year are taxed at 12.5%; redeem over two tax years where possible to use the exemption twice.

If savings fall short: education loans

A loan can fill the gap. Under the old regime, interest on an education loan is deductible for up to eight years under Section 129 of the Income-tax Act, 2025 (old Section 80E), with no upper limit. The new regime does not allow this deduction. See our education loan guide.

Key takeaways

• Estimate today's real cost, then inflate it: ₹20 lakh today is about ₹63 lakh in 15 years at an assumed 8% (illustrative).
• That target needs roughly ₹12,600 to ₹15,200 a month in SIPs at assumed returns of 12% to 10%.
• As of October 2026, SSY (8.2%) and PPF (7.1%) are tax-free safe options; equity funds provide growth for long horizons.
• Move money to safer options three to five years before the goal.
• Protect the plan with term insurance, and treat child ULIPs with caution.