Summary of this article
You may not know what your child will become, but you can start preparing financially for the opportunities that may come their way.
With education costs rising fast, starting early can make a big difference to how much parents need to save every month.
The goal is not to predict your child’s career today, but to ensure money does not stand in the way when the right opportunity arrives.
A child’s career journey can take unexpected turns. A student may show promise in sports, academics or other areas, but the path ahead is rarely predictable. Consider the case of a Class IX student who was a good soccer player and had represented his zonal team. He was later selected for trials for the Delhi state Under-15 soccer team. At the trials, however, he found himself competing with nearly 1,500 aspirants for just 18 places. The student made it to the top 80, but could not secure a place in the final 18.
While the experience was disappointing, it also highlighted a reality that many Indian parents face: children’s interests and career plans can change, and parents need to be financially prepared for different possibilities.
That is why planning for a child’s higher education should begin well before the child decides what he or she wants to pursue.
The Implicit Challenge
Population & Competition: India’s biggest strength that drives the consumption economy also becomes the biggest hurdle. India has about 30 per cent of the population below the age group of 18.
“Every year about 2.20 million NEET aspirants fight for 63,000 seats with government colleges; 1.55 million engineering aspirants run for 18,951 seats with IITs; the IIMs have 750-800 seats for which about 260,000 students compete. The stats for UPSC are worse-958 final qualifiers contest and emerge victorious amongst almost 600,000 students who appear for the UPSC exams,” says Tanwir Alam, founder and CEO, Fincart.
“The point is not merely about the large population, it’s about the fierce competition our children are facing and the resulting consequences,” he adds.
Parents are Deeply Invested: The topmost financial goal of most parents today revolves around their child’s higher education. This feeling is deeply embedded in us because we do not simply wish to protect our child from danger, but want them to thrive in the future, and education becomes the most powerful tool. Education has led people to socially upgrade their life and future. To most parents, sacrifice is an expression of love and it comes with a feeling that “I will provide my children what my parents couldn’t provide.” This also stems from the feeling that as parents we cannot control the future.
The Pressure Cooker Syndrome: Data from the National Crime Records Bureau (NCRB) shows that about 14,488 students died by suicide, representing 8.50 per cent of all suicides in India. A study found that 45.80 per cent of students reported psychological problems, while 8.82 per cent said they felt life was a burden and 6 per cent reported suicidal thoughts. We are, thus, raising a generation in which academic and career pressure can become extraordinarily heavy.
“I am not saying exams are responsible for their mental sufferings. Beyond competition, knowingly or unknowingly, sometimes parental aspirations become larger than the child’s aspirations, leading to their mental pressure. I am sure no parents would ever want that,” says Alam.
The Explicit Challenge
Parents want the best for their children. Most people even sacrifice their retirement to fund their children's education. We see children’s success as an extension of our success – “My child should achieve what I couldn’t.” Their success often becomes the family’s identity, proudly flaunted.
Lack of Knowledge: As parents, we pass through various pain points – first the higher education goal is far away, and psychologically, the brain is not able to comprehend any goal that is very far away – How much money will be needed? Which course will he be interested in? Brain likes clarity, not confusion, and absence of clarity leads to procrastination.
Inefficient Planning: A lot of parents do plan for their child’s higher education but inaccurately. “They plan for their education at today’s cost. The higher education cost is compounding fast at an inflation rate of around 12 per cent. By the rule of 72, at 12 per cent inflation, the costs will double every six years. The higher education cost of Rs 25 lakh in 2026 will become Rs 50 lakh in 2032 (six years) and Rs 1 crore by 2038 (12 years),” says Alam.
The Rupee Depreciation: Parents aspiring overseas education must factor for the depreciation in rupee as well. Rupee has depreciated from Rs 61 per dollar to almost Rs 96 a dollar. The combined inflation of increase in course fees and rupee depreciation has been over 126 per cent over the last 12 years.
How Should The Parent Prepare?
A parent’s biggest nightmare is telling their child, “Sorry we cannot afford your dream.” They would prepare in advance so that when the time arrives, they should be in a position to ask, “Which option is good for you?” rather than thinking, “Which options can I afford?”
All this becomes easier if we start to plan in advance. Most people cannot comprehend the cost of delay. Let us illustrate this with an example. Assume your child is just 3 years old, and starts going to school.
“There are a few things you simply cannot know in advance, including what your child may eventually want to pursue as a career. That is why financial preparation should begin early, irrespective of the career choice,” says Alam.
For instance, a course that costs Rs 50 lakh today could cost around Rs 2.75 crore by the time the child turns 18, assuming education costs rise at 12 per cent a year. If you start investing from the time the child is born and earn an assumed return of 10 per cent a year, you would need to invest around Rs 47,500 a month to build this corpus.
But if you wait until the child is 10 to start planning for the same goal, the monthly investment required would rise to around Rs 1.90 lakh, assuming the same 10 per cent return. The difference becomes substantial because there is much less time for compounding to work.
“With an early start, the total principal invested over 18 years would be around Rs 1.03 crore. If you delay the investment until the child is 10, you would need to put in around Rs 1.82 crore over the remaining eight years to target the same Rs 2.75 crore corpus,” says Alam.
In other words, delaying the investment could mean putting in nearly Rs 79 lakh more from your own pocket. You may not know today whether your child will choose medicine, engineering, design, management or something else. “But you can prepare financially for that uncertainty. Starting early gives your money more time to grow and reduces the amount you need to set aside every month,” he adds.
Be Prepared:
The most painful sentence a parent can hear isn’t “I didn’t get admission”; it may be, “I got the opportunity, but we couldn’t afford it.”
Financial planning for education isn’t really about money. It’s about protecting a parent’s ability to say “Yes” when the child’s opportunity arrives. Money does not guarantee success, but it can certainly help choose between career options.
