Education inflation in India runs at 10 to 12% annually. A degree that costs 50 lakhs today will cost 80 lakhs in six years. The families who are not saving yet are already behind.
Every family planning an overseas education eventually asks the same question. When should we start?
The honest answer is: earlier than you think, and differently than you might expect.
Most families begin the financial conversation in the child’s final school years. By that point, the compounding window has already closed. The loan burden is larger than it needs to be. The options are narrower. What felt like a manageable goal at age ten becomes a stressful scramble at age seventeen.
This is a planning problem. And it has a specific solution.
Understand what you are actually saving for
The tuition fee is the amount that most families begin with. The initial number is incorrect.
Tuition, lodging, food, health insurance, travel, visa fees, and a minimum 15% currency fluctuation buffer are all included in a reasonable budget for studying abroad in 2026. In the UK, that amount ranges from 55 to 70 lakh rupees for a two-year master’s program. Between 65 and 90 lakh rupees for the United States. 15 to 25 lakh rupees for Germany.
Education costs are also inflating. What costs 50 lakh today will cost approximately 80 lakhs in six years at a 10% annual inflation rate. The target is not a fixed number. It is a moving one. The savings plan has to account for that movement.
The three planning timelines
The right savings strategy depends entirely on how many years you have before the education begins.
Ten years or more: This is the most powerful position to be in. Time is the asset. Over a ten-year period, a 15,000 rupee monthly SIP in an equities mutual fund rises to almost 35 lakh rupees at a 12% CAGR. If you raise that to 25,000 rupees per month, the corpus will go close to 58 lakh rupees. Despite their short-term volatility, equity funds are the best option for goals ten years from now. Go here to get started. Continue to be consistent. Don’t change funds solely on a single year’s performance.
Five to seven years: Equity still plays a role but the portfolio needs more balance. A hybrid allocation, which consists of about 40% debt and 60% equity funds, lowers the possibility that gains made over the previous five years may be lost in the last two years due to a market downturn. Over the course of six years, a 30,000 rupee monthly SIP in a balanced hybrid fund with a 10% CAGR yields almost 46 lakh rupees. The majority of middle-class households with children in Classes 6 or 7 fall into this group. The strategy is still workable. To make up for the limited window, a larger monthly investment is required.
Two to three years: This is not a growth investment window. It is a capital preservation window. Debt mutual funds, short-duration bond funds, and fixed deposits denominated in the target currency are the appropriate instruments. The goal is not to grow the corpus. It is to protect what has already been saved and convert it to foreign currency at the most advantageous rate possible before fees are due.
The currency conversion problem most families solve too late
Saving in rupees for a dollar or pound-denominated expense carries a hidden risk. The rupee has moved from 70 to the dollar in 2021 to 92 in 2026. A family that saved 50 lakh rupees in 2021 expecting to cover a $68,000 US programme found that the same corpus covered only $54,000 in 2026.
The solution is partial currency hedging in the final two years before enrolment. Forex fixed deposits allow families to lock in exchange rates for a portion of the corpus. Some banks offer USD or GBP-denominated fixed deposit options for resident Indians. Using these instruments for 30 to 40% of the corpus in the final eighteen months reduces the exchange rate exposure without eliminating it entirely.
Do not convert the full corpus at once. Convert in tranches, spread across six to eight months before the first fee payment is due.
The tax angle that changes the savings rate
Section 80C allows deductions of up to 1.5 lakh rupees annually on ELSS mutual fund investments. ELSS funds have a three-year lock-in period and have historically delivered 12 to 14% CAGR over a ten-year horizon.
For a family saving for a child who is eight to ten years from starting university, ELSS investments provide both the tax deduction and the growth potential needed to build the corpus efficiently. The 1.5 lakh annual deduction saves between 30,000 and 46,800 rupees in tax annually depending on the income bracket. Over ten years, that is a meaningful addition to the effective savings rate.
The one number to calculate before anything else
Before choosing an instrument, before opening an account, before comparing fund returns, calculate the target corpus in today’s money. Then inflate it at 10% annually to the year your child will start university. Add the 15% currency buffer. That is the real target.
Work backwards from that number to a monthly saving requirement. If the monthly requirement exceeds current capacity, the choice is simple. Either increase income, reduce the target programme cost, or plan for a loan to bridge the gap.
The families who do this calculation early have options. The ones who do it late have fewer. The ones who do not do it at all are borrowing more than they needed to.
Start with the number. Everything else follows from it.
– Mr. Sanjay Laul, Founder at MSMGrad
