Some questions plaguing parents about money have been the following:
1. Should I delay my saving/ investing for retirement BECAUSE I am saving for my children’s education ?
2. Should I dip into my Retirement kitty to pay for my children’s education ?
Sadly in the Indian context education is just a broad word I am using. It includes marriage too. I was recently stunned to see a man earning about 9 lakhs gross salary (age 55) wanting to spend about Rs. 23 lakhs on his daughter’s wedding. Apart from a house that he owns, this amount wipes out his net worth – well almost, his PF and PPF are untouched, but they add up to a princely sum of Rs. 20L, that is all.
One major thing for parents to realize should be that retirement is a necessity, but parent funded higher education is a luxury. Not to say that parents should not or cannot fund children’s education, but can the parent afford it.
This post is NOT MEANT FOR THE rich. If you have Rs. 5 crores as your retirement corpus and you need to spend US $ 75000 for a one year Ivy League school fees, by all means do it. However if you are RETIRED, have about Rs. 1 crore in your retirement kitty (including uncertain equity!!) and your son needs Rs. 19 lakhs for his education, you will have to baulk.
Your children have a chance to get a scholarship, work for a couple of years to pay for their education, borrow, get their employer to pay – but you have NO such funding option. Retirement, sadly, has to be self funded. If it is NOT self funded, it has to be pity funded by somebody else – son, sibling, daughter, or society.
Personally I know people who agonize over spending for their children’s education or marriage. I also know those who have a stupid ‘My parents did not do it for me, so I should do it for my kids’ kinda logic.
I also know kids who think ‘hey my Pop has money let him pay’. I also know kids who have borrowed – asking the parents to stay away.
The next question is:
If I do fund my kid’s education, should I make a loan agreement? (okay frankly only ONE person has asked me this)
My answer is a resounding yes. If you do not have the heart to make an agreement, at least have a repayment schedule. This brings in some element of discipline in the kid to repay the loan. When such formal agreements are not in place (and the boomerang kid is staying with you), and is choosy about which job he/ she will take, YOU are going to fret and fume. Take a chill pill dad, I am finding myself, I will take up a job soon.
By the way Dad will you sponsor my honeymoon too? Hmmmm
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