Parent Circle / February 201212

close to `22.25 lakh in 18 years at 10% inflation. Will a young couple have the wherewithal to save for this?

Indian parents are deeply stressed over the rise in gold prices. With a sovereign of gold costing around `23,000, gifting one’s daughter 100 sovereigns of gold for her marriage is more of a pipe dream for many parents. Also consider that some of the ‘best’ caterers are charging upwards of `125 per plate for marriage functions. Is it the end of 3 day marriage celebrations with a gathering of 1000 people (for the middle class, at least)?

THE MODERN CHALLENGES The modern challenges facing today’s parents start even earlier. Just the LKG admissions cost anywhere from `25,000 to `50,000 in an ‘average’ school in a Class B city. Metro schools cost more and so do ‘premium’ schools.

Added to the above ‘basic’ needs, there are the other needs related to social and peer pressure facing children that parents feel they need to satisfy.

It could be a laptop requirement from the school for students of Class 5 and above. Or it could be that foreign vacation that the parent cannot afford, which is routinely indulged in by his son’s classmates.

It could be that your daughter wants an Apple iPhone4s, because all the ‘cool’ girls in her Class XI carry smart phones. While they update their Facebook page every minute, she has to wait to get home to her PC to update her Facebook page.

FINANCIAL PLANNING Financial Planning for our children has two parts. The easier to solve is the financial part, the more intense and difficult one is the behavioural part. The financial part of the financial planning is as follows: 4 To set goals on what is to be done in the future. 4 Assign values / estimates at today’s cost. 4 Forecast (there will be large margins of error here) the expected cost in the future.

T here is an old saying in Tamil which challenges one to “Build a House and Marry off

a Child” – a financial implication that starts when the parents are in their 40s. Today, the challenge starts as early as when the child is in preschool; when the parents are still in their twenties or early thirties. Never in India’s history has ‘quality’ education been so expensive and daunting.

THE TRADITIONAL CHALLENGES The traditional avenues that any parent is concerned about, while planning for expenses relating to children, are for their higher education (college and PG programs) and their marriage. With inflation hovering in double digits, the expected cost of higher studies for their children, leads to a mental paralysis for any parent. A quick calculation in a spreadsheet shows, that based on today’s cost of `4 lakh for an engineering education, one requires

The Need for Financial Planning

BY KARTHIKEYAN JAWAHAR

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