John F Kennedy has said Children are the world's most valuable resource and its best hope for the future.

The arrival of a child is one of the happiest moments in one’s life. The moment you take your baby in your arms for the first time, your priorities change. Those tiny little fingers, smiles, first word, first step – everything becomes a milestone for new parents. The child becomes the reason of your happiness and your world revolves around your child and you want to provide and pamper them to the best of your ability.

Take a break, close your eyes and just think about the coming years.

Do you feel comfortable with the financial health of your growing family?

If you have a child or plan to have child in the coming years, will you be able to meet all of their needs?

As per data available from public sources, the present-day expenses for cost of raising a child varies for each age group:

*Expenses include medical, food, clothing, entertainment, birthday party, gifts, toys, leisure trips, transportation, sports coaching, education etc.

Source: Various public sources

Note: These are indicative expenses from public sources and may vary widely depending upon the standard of living, city of residence, etc.

 

As the table suggests, the cost of education and other welfare keeps rising as the child grows. As parents, one needs to answer these questions as the child’s future depends on your decision today. As it is said by Benjamin Franklin, failing to plan is planning to fail.

There are no better stories than Three Little Pigs and the Fox or The Ant and the Grasshopper illustrating why planning is important. Both the stories emphasize the need for identifying risk and planning.

As Warren Buffet has said, Risk comes from not knowing what you are doing. So, we should prepare a robust plan for child’s future and should not leave the planning to chance or keep postponing the plan. In the words of Malcolm X, Education is the passport to future, for tomorrow belongs to those who prepare for it today.

Present Day challenges

Challenges start much early today than a generation ago.

Children even in their teens need mobile phones and tablets for attending online classes etc. All these aspirations have financial implications that were not there a generation ago. You may not wish to cut corners when it comes to these costs related to children.

When it comes to education, today the monthly fees in many schools that parents aspire to send their children to varies widely.

Source: As per information available in the public domain of reputed educational institutions

 

Considering cost escalation for higher studies, there is a need to plan at the earliest, whether they wish to study in India or abroad. This is the time when the cost of education peaks out, and requires a larger corpus especially if there are overseas ambitions. The top Five destinations for Indians going abroad for higher studies during the last 5 years are United States of America, Canada, United Kingdom, Australia and Germany. The number of Indian students abroad is estimated at 1.5 million. (As on December, 2023)

Source: Ministry of External Affairs

 

As Chanakya has said "Education is ones best friend. An educated person is respected everywhere. Education beats the beauty and the youth."

With these words, the importance of saving for education can never be overemphasized.

In many developed countries, early education is free or subsidised, while in India, education is a major cost in a child's upbringing.

Let’s take a look at the present cost of education in India and abroad.

If you had to plan in 2009 for today’s cost how much would you have had to save monthly then?

*The above figures are rounded off to nearest hundred.

Source: Indian Institute of Management – Ahmedabad, IIT – Bombay, Manipal University – Mangalore.

Costs depicted based on the education costs for the Post Graduate Programme in Management at Indian Institute of Management – Ahmedabad, B. Tech 4 year programme at IIT – Bombay (Fees extrapolated for 4 year course) & MBBS program at Manipal University - Mangalore. 2009 figures based on inflation assumed at 10% p.a. Monthly investment needed to build such corpus by 2024 based on a 15 Year SIP investment rate of return calculated using 15 Year Actual returns as on 31/05/2024 for Benchmark: NIFTY 50 Hybrid Composite Debt 65:35 Index - 11.29%. The above investment calculations are for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. Past Performance may or may not be sustained in future and is not a guarantee of any future returns.

Inflation in education is normally higher than Consumer Price Index Inflation and a delay of even a couple of years will increase your required monthly investing amount substantially.

So, the mantra to Smart Investing for your child’s future is:

• Have a target corpus in mind after adjusting it with inflation
• Start early and invest regularly
• Focus on long term and stay invested

But where do we invest?

Some of the popular investment options for your child are:

Source: **https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx

# As per prevailing tax laws. In view of individual nature of tax consequences, each investor is advised to consult his/her own professional tax advisors before investing

 

Conclusion

It is said a stitch in time saves nine which means if you avoid delay in investing, it becomes easier to achieve your goals. So, start investing for your child’s future now.

Disclaimer: HDFC Mutual Fund/HDFC AMC is not indicating or guaranteeing returns on any investments. Investors should seek professional advice before taking any investment related decisions and alone shall be responsible.

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