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Thankfully, the solution is at hand. And commencement of planning at an early stage is an important step in this process. In our illustrations below, we have outlined how parents, if they start planning early enough, can save comfortably to meet the spiraling costs of their child's education. Given that the career choices for most children revolve around three courses - engineering, medicine and business management, we have assumed three distinct scenarios.

Also, we have assumed that parents will opt for investment avenues like equity funds that offer tax-free returns over longer time frames (more than 1 year) or life insurance (which offers tax-free returns on maturity) to build a corpus for the child's education. Furthermore, expenses charged on the aforementioned investment avenues i.e. entry loads/expenses as a percentage of premium, have been factored in at 3% (although the number is lower for mutual fund investments), over the investment tenure.

You want your 3-yr child to pursue an MBBS course after he completes his schooling. An MBBS course from a reputed institute, today, costs approximately Rs 945,000 (this includes the course fees as well as the lodging expenditure your child will incur if he opts for the course in another city) and your child is 15 years away from pursuing his MBBS course. Assuming that the MBBS course fees are hiked by 10 per cent per annum, the number you are looking at 15 years hence is Rs 3,947,500. The figure appears overwhelming, but if you start planning for it now it can be within reach. As per our calculation, if the rate of return is assumed to be 6%, then you need to invest upto Rs 169,595 per annum (p.a.) to reach this figure. Likewise, on assuming a 10% return, you have to invest upto Rs 124,243 p.a. to accumulate the desired amount.

Likewise, for pursuing an engineering course (including lodging expenses), which costs approximately Rs 700,000 today, you will have to shell out Rs 2,924,074 after 15 years. At 6 per cent rate of return you have to invest upto Rs 125,626 p.a., whereas this figure will be Rs 92,032 p.a. at 10 per cent rate of return.

An MBA course, which at present costs around Rs 520,000 (including lodging expenses), will cost Rs 2,172,169 after 15 years. To accumulate this amount, you have to invest around Rs 93,548 at 6 per cent return p.a. or Rs 63,404 at 10 per cent return p.a.

There are some points parents must note that will help them plan for their child better.

1. In our illustration, we have assumed that parents commence their planning from scratch i.e. they haven't saved any money at all. However, if parents have already set aside some money to begin with, it can serve as a major boost to the planning process.

2. Parents, who are willing to take on higher risk, need to save less for their child's education. However, parents must note that taking on higher risk is not a surefire recipe to financial nirvana. There could a lot of ups and downs along the way.

3. As tax laws stand today, proceeds from long-term investments in equity funds and life insurance are tax-free. So the money you are accumulating for your child's education by using these avenues will not be taxable. However, if tax laws were to change along the way (after all 15 years is a lot of time), the tax implication will have to be factored in your calculations.