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How to Plan for the Future Expenses of your Child
1.
2.
3. planning the future expenses of your child. It will take you
about 15 minutes to read this. We hope you can first invest
that time for your child, before you start investing money.
We spoke to a lot of people trying to understand how they
approached this challenge. Yes, a challenge it is indeed. And
we realized that we had a lot of variety in responses –
almost as many as the people we spoke to. But there was
one thing in common – no one says that they do NOT have a
plan for their child. That’s a good start. But the problem is –
do they have a plan that will really work best? Will it stand
the test of time? What if the parent dies halfway into it – will
it still work? These are questions we will answer in these 3
articles. Do read with your fullest attention.
Many parents appear unclear about the kind of expenses
that will need to plan for. Sometimes, they seem to not
realize that the killer called inflation is constantly working
to increase the requirements for their child’s education,
marriage, etc. That’s not the right thing to do. Also, some
parents just want one big sum of money, and do not take
timing of the need into account. That’s not right either.
We will now attempt to answer the following questions for
you.
4. Part 1 – What are the expenses to be planned for our child’s
future?
Part 2 – What should be the approach when we do this?
How can we make it shock-proof?
Part 3 – What investment options can ensure that our
aspirations for our child’s future are met?
Part 1 – What are the expenses to be planned?
Before we start anything, it is important to list the goals.
Let’s start with clarity on this.
Let us assume your daughter is say, 3 years old today. She
is already in her Nursery class. You have paid fees of say,
Rs. 30,000 for the year. And you have already started
getting the feeling that much larger expenses for her
schooling are going to hit you shortly.
There are also questions like … Which school? a nearby one
which is cheap or an ICSE school whose fees are a little
higher? or the IB school which your office colleague’s
daughter also goes to, will that be the best one for your
5. Of course, there is also extra-curricular activities – painting,
abacus class, chess class, music and instrumental, karate, …
the options are unlimited. All that is going to cost you
money as well. Not enrolling for such classes is perhaps not
an option in this competitive world. It’s a race, and it has
already begun!
As she grows, there will be school tours, college expenses,
post-graduation school expenses, hostel and food expenses,
etc.
We will leave these choices for you to decide what is best for
your child. You are the best judge. But remember that these
expenses will keep going up over time for two reasons – one
: higher classes will cost your more, and two : over time,
inflation will make them even more expensive.
You stand no chance to afford all this if you haven’t planned
for it. That could be a failure as a parent, and we are sure
you don’t want that to happen. So not planning is not an
option.
Here is a recommended approach that will ensure that your
6. if you start early there is one powerful thing you will have
on your side – TIME. And for those who do not believe that
time can be powerful, here’s some timely advice.
So what are the expenses that can be managed as they come,
and which are the ones that you need to really plan for?
Here goes.
Regular Expenses for you Child Plans – School fees, bus
fees, coaching and tuition fees, extra-curricular activity fees,
etc. till your child reaches Std. XII.
College Expenses – Depending on which stream of
education (Medicine, Engineering, Art, Languages,
Literature, Economics, etc.), which college (a local city
college, an IIT or an IIM, a foreign University, Harvard, LSE,
INSEAD, etc.) and where it is located (your city, somewhere
else in India, S. E. Asia, Europe or Australia, the US, etc.),
the amount of money that your child will need will vary
immensely – anything from Rs. 5 lakhs a year to Rs. 2 cores
a year, since inflation will make these costs as much as 8-12
times their current costs. If you don’t believe me, compare
