School Fee Season: Smart Ways To Budget For Annual Education Expense

The onset of the new academic session is often fraught with financial stress for parents already walking the household budget tightrope.

Amid the rising cost of education, people explore ways to build their child's academic future so that they do not end up getting weighed down under a financial burden. Here are some smart ways to budget effectively for annual education expenses:

Avoid waiting until the last minute to allocate funds for school fees as this could ultimately lead to financial strain. Instead, start saving money well in advance. This allows more time for your investments to grow. Also, people can start with a dedicated savings account that exclusively takes care of the child's education. The key here is to find out investment options that are related to education and can go on to yield high returns in future.

An education investment plan, which can generate high interest in the future, can play a major role in funding your child's education-related expenses. Here, parents can also opt for education-oriented insurance policies, which provide both life coverage as well as a guaranteed amount for the child on reaching a certain age. Such policies are specifically designed to fund education goals, allowing partial withdrawals to meet major expenses for the higher education of your children.

Another much-preferred option here is SIPs in mutual funds. This grants an opportunity to invest a fixed amount regularly. 

A careful review of the school fee payment structure can help in opting for an instalment plan that best suits the budget. Schools usually allow parents to submit fees for their children in the form of monthly or quarterly instalments. Go for an option that does strain your annual budget.

In India, there are multiple schemes that have been specially designed to take care of education savings. One such pivotal scheme for girls is the Sukanya Samriddhi Yojana. The government-backed schemes not only provide competitive interest rates, but also help parents to save on taxes.

For parents who want to choose lower-risk options, fixed deposits (FDs) or recurring deposits (RDs) can be the best options. These are the most stable options that provide guaranteed interest over a specified period of time.

Several educational institutions in India offer merit-based or need-based scholarships. This can lower tuition fees significantly and help in saving extra money that can be invested to accumulate wealth.

The best possible way to reach your financial targets is by cutting or eliminating non-essential expenditure. This will save extra money that can be redirected toward the school fees and help ease financial pressure.

Financial situations can change from time to time. Hence, people should always keep the impact of inflation in mind when planning investments for educational purposes.

Parents can claim tax benefits for expenses on the education of children under Sections 80C and 10 of the Income Tax Act, 1961.

Any parent can claim deductions for the actual amount paid as tuition fees to a university, college, school or any other educational institution in India under the overall limit of Rs 1.5 lakh under Section 80C. On the other hand, Section 10(14) allows deductions to salaried taxpayers for children’s education and hostel fees. Under the education allowance, parents can claim a deduction of Rs 100 per month per child up to two children. A deduction of Rs 300 every month per child up to two children is allowed toward hostel fees.