How this works
Tuition typically grows faster than general inflation (6-9% per year vs 4-6% for CPI). We project each of the N years of college at its own inflated price, then sum them for the total future cost.
Year-t cost = Current cost × (1 + inflation)years_to_college + t − 1
Your existing savings compound until college starts. The gap between the projected total and the compounded savings must be funded by monthly contributions, which themselves earn returns.
Savings vehicles
- India: Sukanya Samriddhi (girl child, tax-free), PPF, ELSS mutual funds, Sector-specific MFs.
- US: 529 plans (tax-free growth if used for education), Coverdell ESA, Roth IRA (for backup flexibility).
- UK: Junior ISA, stocks & shares ISA.
FAQ
Should I target 100% of cost or less?
Many families aim for 50-75% and cover the rest via scholarships, work-study, or student loans. Targeting 100% is the safest but not always feasible.
What if my child doesn't go to college?
The money is still yours. If you used a 529 or similar, you can change the beneficiary to another child, yourself, or withdraw with some penalty.