What should be "Current Cost of Education": The "current cost of education" should reflect the current expenses associated with your child's chosen education, taking into account tuition fees, accommodation, books, and other related costs. The cost will depend on the kind of education your child wants to pursue. Cost of professional education e.g. engineering, medical, management etc will be significantly higher than general stream. If your child goes to a college / university in a different city, you have to factor in living expense; living expenses including food, lodging, transportation etc will be different from city to city. If you want foreign education for your child the cost will be several times higher than what it costs in India. You can consult a higher education advisor / consultant if you want to know how much your child’s education will cost.
What should be the "Expected Rate of Return": The "expected rate of return" will depend on where you invest for your child’s higher education. Different investments have different risk profiles; risk and return are interrelated. You should invest based on your investment tenure and risk appetite. For example, if you start saving for your child’s higher education when he / she is 7 – 8 years old, you will have around 10 years of investment tenure. Over long investment tenures equity funds can be suitable investment options. If your investment tenure is 3 to 5 years, you may want to invest in hybrid funds. If your investment tenure is even shorter, then debt fund will be suitable for you. You should consult with your financial advisor if you need help in making investment decisions. You can refer to long term returns of different asset classes / sub-categories to form your return expectations. It is important to refer to long term asset class returns because short term returns can be misleading.
What should be the "Rate of Inflation": It's crucial to consider inflation when planning for your child's education because it can significantly impact the amount you need to accumulate. The inflation rate you enter should be based on historical inflation trends and future expectations. According to historical data (last 10 years or so), higher education cost inflation has been in double digits. You should consult with your financial advisor if you need guidance.
Amount that you can invest now: If you have spare funds that you can invest for your child’s higher education right now then use the advanced option. It will reduce your monthly savings requirement. It is wise to use spare funds for your long term financial goals, provided you have set aside a contingency fund to meet any exigency. Spare funds often get consumed in wasteful expenditure. If you invest them wisely for your long term financial goals, then you can wealth creations benefits through compounding.