No Child’s Play

Bringing up children is expensive and draining on resources, but it is one expense that no parent leaves unturned. Emotional quotient put aside, bringing in children without thinking of the financial implications could turn into an unpleasant situation. Just imagine the costs from child birth to college—a period of nearly two decades, when you need to provide for them with nothing but the joy of seeing them grow in return.

“We started saving for our son’s education right after we got married,” stresses Nishit, 37 and Deepika Nishant, 35, parents of 2-year old Darsh. The young couple is well aware of the rising cost of education, which made them start planning for their son’s education before he was born. Given the intense competition at the time of even nursery admissions, education is no more as affordable as it was, say, a decade ago. Rising peer pressure is another factor that contributes towards spending more than necessary at times.

“Sometimes we enrol our children to a particular school only because it has become a status symbol in the society,” expresses, Amit Chandra, associate director - Policy Advisory, Centre for Civil Society. But, it is true that parents would do anything within their means to provide the best for their children. One way to provide the best for your child is to make an early start when saving for their future needs.

Says Delhi-based financial planner, Amit Suri: “As is the custom in India when a child is born they are given some cash, which should be the first saving towards your child’s education.” There is merit in this approach and it has been found that when saving or investing with the purpose of the child’s education or future, parents rarely get into using the investments for any other purpose. “They don’t touch it even in case of emergencies,” stresses Suri.

Regular costs

Over a 18-20-year span, you will need money for schooling, birthdays and parties that your child will attend and host, school events which you need to be prepared for and eventually college education. Schooling itself has complicated with different boards, IB schooling or Cambridge curriculum and other variants, making it hard to choose what is best for your child. One thing is certain, school fees need to be paid regularly, which can be claimed as an expense under Section 80C of the income tax Act, up to Rs 1.5 lakh each year. However, this tax benefit is only on the fee and not on transportation, development fund or tuitions.

“The early years of school is the time where a child is most receptive to learning and grasps almost everything that is fed to them. You need to be careful about the system that they follow in these initial years,” says Priyanka Sinha who has been teaching primary school children for several years. School curriculum is also changing with importance being given to non-academic pursuits like sports and other curricular activities. The focus is more towards overall development of children than a one-sided academically oriented one. “We want best education for our child which includes overall personality development in a secure atmosphere” express Noida-based, Ashit and Shivangi Anand. Their 3-year-old daughter is about to get into school, and the parents are clear about what to let her study in school with the right infrastructure and values which will come in handy later in life. “There should be personalised learning, even if it is expensive, as it would do our child a lot of good in life,” adds Ashit.

Funding college

One of the major expenses that parents face when it comes to education is to fund college. This gets complex the moment your child decides to opt for a professional course, because these require a much earlier preparation apart from regular schooling. An engineering college preparation would commence two years before your child leaves school. Pursuing a regular preparatory course for two years can cost upwards of Rs 5 lakh depending on the pedigree of the coaching centre and the kind of engagement you seek.

Do not be intimidated by the high cost of education, because, like all other financial goals, this too can be achieved if you plan for it. “Create an education fund, and start investing in it as soon as you can,” suggests Suri. Although there is no structured product to put money in for reaching this goal, like the NPS to build a retirement corpus, there are several variants which could be used to create the education corpus.

As a child’s education is several years ahead, chances of knowing the exact sum that you need to fund college may be near impossible. This should not deter you from making a start. “We started saving early to make it a routine than be surprised at a later date,” explains Nishant. They have made a start, and plan to review their savings and investments for Darsh, once every few years.

If you are not so comfortable with risks, take a combination of life insurance policy and invest in mutual funds. If you start before your child turns five, chances of investing for over a decade will mean you can benefit from equities as an asset class, which work in the long run. If you start late, worry not, there are education loans that you could consider if the need arises, which is another way to fund your child’s higher education.

rounak@outlookindia.com