Financial planning for your child


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Financial planning for your child

  1. 1. coverstory BY KARTHIKEYAN JAWAHARThe Needfor Financial close to `22.25 lakh in 18 years at 10% inflation. Will a young couple have the It could be a laptop requirement from the school for students of Class 5Planning wherewithal to save for this? and above. Or it could be that foreign vacation that the parent cannot afford,T here is an old saying in Tamil Indian parents are deeply stressed over which is routinely indulged in by his which challenges one to the rise in gold prices. With a sovereign son’s classmates. “Build a House and Marry off of gold costing around `23,000, giftinga Child” – a financial implication that one’s daughter 100 sovereigns of gold It could be that your daughter wants anstarts when the parents are in their 40s. for her marriage is more of a pipe Apple iPhone4s, because all the ‘cool’Today, the challenge starts as early as dream for many parents. Also consider girls in her Class XI carry smart phones.when the child is in preschool; when that some of the ‘best’ caterers are While they update their Facebook pagethe parents are still in their twenties or charging upwards of `125 per plate every minute, she has to wait to getearly thirties. Never in India’s history has for marriage functions. Is it the end home to her PC to update her‘quality’ education been so expensive of 3 day marriage celebrations with Facebook page.and daunting. a gathering of 1000 people (for the middle class, at least)? FINANCIAL PLANNINGTHE TRADITIONAL CHALLENGES Financial Planning for our children hasThe traditional avenues that any parent THE MODERN CHALLENGES two parts. The easier to solve is theis concerned about, while planning for The modern challenges facing today’s financial part, the more intense andexpenses relating to children, are for parents start even earlier. Just the difficult one is the behavioural part. Thetheir higher education (college and PG LKG admissions cost anywhere from financial part of the financial planning isprograms) and their marriage. With `25,000 to `50,000 in an ‘average’ as follows:inflation hovering in double digits, the school in a Class B city. Metro schools 4 To set goals on what is to be done inexpected cost of higher studies for their cost more and so do ‘premium’ schools. the future.children, leads to a mental paralysis 4 Assign values / estimates atfor any parent. A quick calculation Added to the above ‘basic’ needs, today’s a spreadsheet shows, that based there are the other needs related to 4 Forecast (there will be large marginson today’s cost of `4 lakh for an social and peer pressure facing children of error here) the expected cost inengineering education, one requires that parents feel they need to satisfy. the future.12 Parent Circle / February 2012