Opinion | Planning higher education for your little one

 (Illustration: Sudhir Shetty)

Most of us have been part of family conversations that go, “When I was young, everything was so cheap” with multiple examples thrown in ranging from food items to petrol prices. The absolute changes in values are very significant, but when you put them down in numbers, the changes are mostly in line with inflation over the years. However, costs of education and health care have gone up at a significantly faster pace than other products.

Over the last 15 years we have been working with clients and their families on setting and monitoring their financial goals. One of the biggest shifts that we have noticed with respect to financial goals is the desire and dream to ensure that children get access to international education—either overseas or in institutions that offer international curriculums in India.

The shift to the dream of an “international” education has been driven by a combination of factors.

These include increased international exposure due to foreign travel for work and vacations, the proliferation of international schools over the last few years that have an experiential learning system rather than rote learning, the brutal competition domestically for the best institutions for higher studies, and of course, the significantly higher disposable incomes driven by salaries that are at global standards, as well as the increase in double income families.

How much money do you need for it?

The starting point to achieve this objective is to estimate the cost of education accurately. The cost will depend on the type of the course and the location of the educational institution. While estimating the amount, remember that factoring in only tuition fees is not enough. You should also consider other costs such as extra-curricular activities, living expenses, medical costs, books, supplies and travel cost of the child and parents. Living on or off campus could make a huge difference in costs too.

Impact of total inflation, not just education inflation

Since planning for education is usually a long-term goal, considering the right inflation rate is important as most people underestimate inflation rates and its compounding impact.

While that is probably true for general inflation, education inflation globally does tend to be much higher than general inflation.

Education inflation in the US, for example, is currently between 4% and 5% per annum, down from 6-7% per annum that it used to be, but still high enough that education costs double in 12-15 years. In addition, the exchange rate movement will also need to be factored in.

How you can save for this goal

Using a combination of the estimated cost of the education today, the total inflation and the number of years before this money is required, the total corpus needed can be estimated. The good news is that not all this money is likely to be required together, so a year-wise amount can be arrived at.

Accordingly, a portfolio investment strategy with a robust asset allocation will need to be developed in light of risk tolerance and historical returns of various asset classes.

Based on these estimations, you can arrive at an investment amount. While most investors tend to be overwhelmed by some of these numbers, it is important that the numbers are broken down into smaller amounts like monthly savings amounts and then increased over a period of time. Like most other goals, a high quality education goal(s) can be achieved, with the right planning, discipline and execution.

[“source=livemint”]

Opinion | New education policy misses a critical chance to address inequalities in system

Not specifying a common minimum standard below which schools cannot fall, creates conditions where quality of facilities in some schools will only sink lower. (Mint)

The draft National Education Policy (NEP), 2019, is full of provisions that many in the education sector have been desperate to see for decades. The conferring of the Right to Education to children under six and above 14, doubling of the overall financial allocation to education and strengthening the teaching profession bring cheer. However, many of the policy’s omissions and contradictions, combined with the previous track record of central and state governments in implementing existing education policies, diminish this hope.

The omissions: While the policy talks about the need to bring “unrepresented groups” into school and focus on educationally lagging “special education zones”, it misses a critical opportunity of addressing inequalities within the education system. It misses to provide solutions to close the gap of access to quality education between India’s rich and poor children. It proposes to remove the expectations that all schools meet common minimum infrastructure and facility standards, and that primary schools be within a stipulated distance from children’s homes.

India’s schools already vary across the scale—from single room structures without water and sanitation, to technology-enabled international schools. Not specifying a common minimum standard below which schools cannot fall, creates conditions where quality of facilities in some schools will only sink lower, widening this gap.

This is even more of an issue since it proposes a roll back of existing mechanisms of enforcement of private schools making parents “de-facto regulators” of private schools. Parents, and particularly poor and neo-literate parents, cannot hold the onus of ensuring that much more powerful and resourced schools comply with quality, safety and equity norms.

India should have moved towards a national system of education that shapes India’s next generation and enforce standards of quality across the country.

The contradictions: While the policy places considerable emphasis on the strengthening of “school complexes” (clusters of schools sharing joint resources) and decentralized mechanisms for supporting teachers, their everyday management appears to have been tasked to the head teacher of the secondary school in the cluster.

Furthermore, no separate funding appears to have been earmarked for this. This is false economy, since this is a full time activity and needs to be staffed and resourced accordingly.

Lessons from non-implementation of past policies: The policy’s implementation is predicated on the assumption that the education budget would be almost doubled in the next 10 years through consistent decade-long action by both the centre and states. However, the revenue is decentralized to the states and it is unclear what would be done to ensure that resources needed will be allotted. The sheer scale of changes expected, the rapid timeline, the absence of a strong mechanism for handholding states on this journey and the probable inadequate budget raises questions on the full implementation of this policy. India’s history is littered with ambitious education policies that have not been fully implemented. The National Education Policy risks following this tradition, unless the government addresses the reasons behind the past policy-practice implementation gap and makes conscious efforts to carry all of India on the same road towards improvement in education.

[“source=livemint”]