Education Savings Calculator

Education costs have a habit of rising faster than general prices, and the bill arrives all at once. If a child is five years old and you want a four-year degree paid for when they are eighteen, the sum is not today’s fee multiplied by four. It is each year’s fee after a decade or more of increases. This page projects those fees and tells you what monthly saving would cover them.

How the fee grows

Each year of the course costs today’s annual figure × (1 + education inflation) raised to the number of years until that year of study begins. If the course starts in 10 years and runs for 4, the first year’s fee is inflated for 10 years, the second for 11, the third for 12 and the fourth for 13. The total is the sum of the four. The table in the results lists each year so you can see the pattern.

A worked example

The defaults assume a current annual cost of 4,00,000, a course that starts in 10 years and lasts 4, education inflation of 8%, savings of 2,00,000 already set aside and a return of 9%. The first year of the course will cost 8,63,570, and the four years together 38,91,343 (the four fees are 8,63,570, 9,32,656, 10,07,268 and 10,87,849), against 16,00,000 at today’s prices. The existing savings grow to 4,90,271, leaving a shortfall of 34,01,072, which needs a saving of 17,575 a month. In the postgraduate sample, starting in three years, the first year costs 14,70,052 and the two years together 30,43,007, yet with the money kept invested the amount needed on the first day is 29,26,492.

Two ways to fund it

Funding the whole course by its start is simple and safe: when the first fee falls due, the money is all there. Keeping the rest invested is more efficient, because money needed in year three or four earns a return for two or three more years. The cost is some risk, since the investment could fall just when you need it. The switch lets you compare the two, and you can plan on the cautious figure and treat the other as the best case.

Choosing the rates

Education inflation differs between countries, institutions and courses, and has often run above general inflation. Use a rate based on what fees have done where you plan to study, and try a higher one as a test. For the return, use a rate that matches how you will actually invest the money; a long horizon can justify equity funds, a short one calls for deposits or debt funds.

Edge cases

If the course starts now, with zero waiting years, the page shows no monthly saving, since the money is needed immediately. A course of up to ten years is accepted. If your savings already exceed the amount needed, the shortfall and the monthly saving are zero. Currency changes matter for studying abroad, so enter the cost in the currency you will save in, using a sensible conversion.

Limits

Scholarships, education loans, tax benefits and changes of plan are not included, and fees are assumed to rise smoothly every year. Treat the result as a planning figure and recheck it each year as actual fees become known.

Related tools

• Sinking Fund Calculator solves the same saving problem when the goal does not need inflating.
• Education Loan Calculator shows the repayment side if part of the cost will be borrowed.
• SIP Calculator projects a monthly investment towards the same goal.
• Inflation Calculator shows the effect of rising prices on any other cost.