Your Children's Education?
by Mr. P.V. Subramanyam, Subramoney.com
Do not dip into your retirement corpus to fund your child's education
For most Indian parents, their children's education is an important goal. But, they often compromise other key goals to fund this one.
Parents either delay saving / investment for their own retirement because of the expenses on their children's school / college education, or / dip into their retirement corpus to fund their children's higher education.
Education in the broad..!
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| P.V. Subramanyam, CEO, subramoneycom.com |
Apart from a home, she has nealy Rs. 25 lakh in her Provident Fund (PF) and Public Provident Fund (PPF).
The wedding will nearly wipe out her entire life savings.
Parents need to realise that retirement is a necessity, but funding their child's higher education is a luxury. It is certainly an important goal, but can you afford it?
If you have a retirement corpus of Rs. 5 crore, you can spare Rs. 48 lakh (about $ 75,000) a year to send your child to an Ivy League college. But, if your retirement corpus is only Rs. 1 crore, and your son needs Rs. 20 lakh for his/her MBBS / BE / MBA programme, you will have to think twice.
Many options for funding higher education
There are now many options for funding higher education. Your children can work hard to secure a scholarship. Or / they can work for a couple of years & save enough to pay their fees.
Education loans are also easily available. Promising candidates can even get their employers to pay for their education.
As for the parents, the options are quite limited. Retirement has to be funded by your own savings.
If you do not have enough savings / investments, you will have to depend on the pity of others.
They can be your children, siblings and, sometimes, the society. Are you sure you want things to come to such a pass?
Emotional topics
Saving / Investment for children's education & marriage are emotional topics.
People do it because they have a natural connect with the beneficiary. Some believe this to be a duty for a parent.
Others say, `My parents did not do it for me, but I should do it for my children.' I know children who think: `Hey my father has the money, so let him pay.' But there are also kids who borrow for their education without burdening their parents.
If you also want to fund your child's education, the best way is to take a loan. Make your child sign an agreement where he is made responsible for the repayment of the loan. This will not only instil discipline in the child and push him to be prudent, but also relieve you of the repayment burden.
About the author..!
Mr. P.V. Subramanyam is CEO at www.subramoney.com
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