For all parents, the greatest rejoice is the birth of first child. And, yet the chain of expenses associated with bringing up starts with the joy of a new baby on the way. In fact, starting with maternity, food, clothing, education, hobbies and health cares or entertainment to the caretaker costs, thus having a child costs you a lot more than love and emotional energy. The purpose of this article, we will enlighten to an average middle – to upper-class parent towards expenses to be incurred for emotional or social reasons. Some expenses have to be tailored to your wallet. For working parents, child cares expenses have, now become an integral part of household budget whether they use to live in joint family or nuclear family. They are, however pretty clueless about planning financially for their first child. In joint family, grandparents are big source of strength and support to supervise as childcare helpers, the cost of domestic help or crèche remains high until children go to school. But in nuclear family, it is a very big responsibility for every parent to manage the cost of education from childhood till university.

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The Initial Cost of Baby

There is a priceless moment and feeling of the pride when you hold your baby in your arms for the first time. But, every parent should prepare themselves emotionally and financially as the most miscarriages happen within the first three months, it may get a very disheartening and a new baby cost journey begins with pre-natal medical expenses, is often underestimated by the most of parents. The cost of all the tests and medical-checkups associated with childbirth add up to anywhere between Rs50,000 and Rs1 lakh, depending on whether it is a normal birth or a caesarean. And this does not include the extra bucks you may want to shell out to test for down’s syndrome or if you want to bank the core blood for your child’s future health. It can set you back by Rs1 lakh. In these years, there is never a less expensive phase in a child’s life; it is the cost of immunization, minor illness and for middle-class parents, things like diapers, baby food, toys, and childcare and birthday celebrations so you may end up going even more often than average.

The School-going Costs

The education cycle begins with play way school which is almost between 16 to 18 months after birth, can cost anywhere Rs10,000 and Rs1 lakh per year. For urban parents, securing admission in first three months of the calendar year for their child to a ‘good’ school, often involves shelling out some kind of donation or capitation fee. Estimates of the cost of raising one child to the age of four years may vary from 10% of monthly family income which goes to monthly caretaker/crèche expenses to as high 25%. Every parent should always bear in mind the fact that expense will start only mount as their children grow older. Their education and hobbies are the biggest concern for the most of parents as clothes, entertainment, vacations, gizmos, pocket money, food, healthcare and housing followed in that order. The average fees of private schools are Rs60,000 to Rs3 lakh per annum, transport costs an average of Rs12,000 to Rs25,000 per child per year, uniforms, text books, stationery, shoes, school bags etc. parents have to nearly spend Rs6,000 to R10,000 per child depending upon the school. Apart from that, their extra coaching and extra-curricular activities, would be adding a significant burden on their family budget.

The Higher Education Costs

This is that stage where times flies and before you know, the time arrives for your child to enter college when costs of education and their life style really spiral, on all fronts. Costs of private coaching, hobbies, mobiles, gadgets, holidays with friends, eating out, and movies etc. rise rapidly it is, hence an alarming time, when poor financial planning of earlier years begins to be felt. In these times, Indian parents being willing to sacrifice almost everything for their children. They are ready to take an education loan to pay for high professional course. While considering the fact that education inflation is going to higher than general inflation, the cost of education will always go up and never let down, they need to be vigilant till the age of 21 and could cost you between Rs15lakh to Rs20 lakh, if we consider costs as of today. And costs may further rise in triple-digits, if we estimate the cost after 20 years while assuming prevailing education inflation @ 10% p.a.

The below table is corroborated inflated the cost of education a four year professional course like engineering or medicine costs worth Rs 15 lakh in today’s value.

Education Inflation 8% 10% 12%
Cost after 5 years 22.04 24.16 26.44
Cost after 10 years 32.38 38.91 46.59
Cost after 15 years 47.58 62.66 82.10
Cost after 20 years 69.91 100.91 145.00

All costs are figured in Rs lakh

Sample this table, we have considered the cost of education worth Rs 15 lakh in today’s terms to be the cost of engineering from a good college in India and includes all the cost such as fee, boarding, mess fee and even making two annual trips to home.

Trigger for Financial Planning

The avalanche of education costs to children is definitely got trigger for financial planning and savings happens with the birth of the first child. While planning the cost, you should not get carried away by the emotion that your child must get the best of everything. Think rationally, do not follow the herd and listen to your heart and use your mind. Though the education is the biggest expense, you should start to plan well all judicious expenses and save well and decent invest in equity at an early age for long term, the better your chances are of enjoying a financially less stressful experience when your children enter university.

These worries about the high cost of education may make gullible parents in this group get easy traps for mis-buying costly child insurance plans. Almost all the parents have had child insurance plans and have been paying hefty premium every year which eats away good part of their saving as expenses. By curtailing these premiums, you must build your own corpus by investing in a portfolio of mutual funds with a 15-20 year time horizon that could meet enough to pay for your child’s college and higher education. To secure the goal of education cost, you must consider other financial products by taking adequate term life insurance and health insurance for family so that your child’s education expenses are not got disrupted. Save regularly every penny in each month in equity diversified fund and PPF for at least 20 years for the benefit of your child. Remember, these saving and plan will work the best, if you curtail your temptation to use the money to fund your other financial needs.

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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