Retirement or Children’s Education?
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
Dr M.Chandrashekhar
How true, Subra. I repaid my son’s Education Loan of 15L + Interests upfront since he wanted to be an Entrepreneur.
With the load off his head, I realise now he is quite relaxed & taking his own sweet time about scaling up his business– & making good money. I wish I had let him slog & repay his loan to the bank !
I have given him a financial time table of his monthly repayment to me thru our common CA– so far so good –he has been sticking to the schedule! My spouse growls at me periodically for being a painful father ! I guess the Umbilical Cord connection is stronger !
subra
umbilical chord vs mangalsutra – you NOW know which is stronger 🙂
Shankar
Dr.Chandrashekhar sir, you are lucky to have son repaying the loan from you. Subra said that some kids will forget about it, that is horrible.
Many Financial blogs says that keep your spouse in loop on all financial decisions and happenings. I find it quite controversy with the following points:
1) Lot of kids wants their parents to pay because they KNOW Parent has lot of money (irrespective whether it is retirement kit or PF)
2) Umbilical cord connection is stronger. Means lot of constant pressure will be on the father to donate the retirement money and assuming that the kid will take care of them during old ages.
So if the mother knows that Father has money( meant for retiement fund+PF) and not helping struggling kids. It is disaster to the relation and daily headache.
So what if the Father keeps the Mother not exactly know about the exact financial situation (but have a WILL with financial details, in case if he is not around), wouldn’t it solve all the problem?
1) Son(and importantly daughter-in-law) knows his Father cannot help much financially so he will lead his own life without bothering parents.
2) Mother won’t have any ill feeling towards Father.
3) Father is happy that he has his retirement kit and self-sufficient.
How does it sound, how to make it practical?
Hardik
Hi, I dont understand which MF I should start SIP in my son’s name(2months old) I invested full in PPF, Post(3K/month), LIC jeevan anurag & LIC komal jeevan.
I thought to do SIP in BHEL but sold when I got profit and I dont want to trade, so want to SIP for minimum 15-20yrs(3-5k/month)for his education.(I never did it before)
Please advice