English Edition | 17 March, 2023, 08:55 AM IST | Today's Paper

You’ll spend Rs 1.05 crore on your child: Step-by-

step guide on how to save this amount
By Riju Mehta, ET Bureau Last Updated: Nov 14, 2022, 04:01 PM IST

Synopsis
Find out how much money you will need at different stages in your child’s life. We've
calculated how much money you will need for your child by splitting the journey into 6
stages: from the nine months of pregnancy to 0-2 years, 3-5 years, 6-12 years, 13-18 years,
all the way up to post-graduation.

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Would you trade Rs 1 crore for nothing
more than smiles, hugs and love, and
no guarantee that these will last a
lifetime? If you have a child, you are
already doing it. For this is how much
you are likely to spend from the time
you conceive till the child completes
his post graduation if you are living in a
metro or a tier 1 city. To be precise, you
will spend Rs 1.05 crore.

While some parents cover this financial journey with ease, others struggle to
meet the child’s goals, be it long-term milestones like graduation and
marriage, or short term ones like buying gadgets and organising a party for the
kid. Though it helps to have a high income to save for all the kid’s goals and
still provide a comfortable lifestyle, it may not always be possible to have a
high salary or surplus. You could also start saving late or use the wrong
instruments to invest for goals. Either way, it may result in a shortage of funds.

“I may not be able to amass the entire Rs 50 lakh for my son’s MS, and will
have to take an education loan for Rs 20 lakh or so,” says 48-year-old Abhijit
Kadu from Pune, whose 20-year-old son Hritwik is studying for his B.Tech
degree.

B.Tech degree. Hyderabad-based P. Vamsee Krishna, 39, regrets delaying

investment in mutual funds for his two kids aged 13 and 11. “I should have
started with mutual funds much earlier. Now, even though I am raising the
investment in mutual funds each year, I may have to increase my earning
potential by learning new skills.” Another common mistake is choosing the
wrong goal. “You may have earmarked an amount for the child’s medical
education, but he may want to be a musician,” says Anup Bansal, Chief
Investment Officer, Scripbox. This will not only require a different investing
strategy and time frame, but also different instruments.

The best trick is to start planning for your children the moment you decide to
begin a family. “You should start saving even before the child is born because
the cost of education is very high,” says Dinesh Rohira, CEO & Founder,
5nance.com. This is also the reason you should factor in inflation while
calculating the goal values.

Goal values can also go wrong if you make wrong assumptions and
calculations about the amount you will require for your child’s needs. This is
where ET Wealth can help you. We have calculated how much money you will
need for your child by splitting his journey into six stages, starting from the
nine months of pregnancy, moving to 0-2 years, 3-5 years, 6-12 years, 13-18
years, up to his graduation and post graduation years between 19 and 24 years.

You will spend the most, which is nearly Rs 42 lakh, for his higher education
in the last stage and the lowest, Rs 1.8 lakh, during pregnancy. While
healthcare needs like vaccinations take up the bulk of cost during the first two
years, these are gradually replaced by high childcare and education costs when
the kid is between 6 and 12 years old, and these surge in the last stage as
education expenses.

Also read: 7 money mistakes to avoid while saving for kids

We have listed all these expenses in the following pages along with the
assumptions made for carrying out the calculations. Remember that all these
calculations are for Delhi, and the expenses are likely to drop if you are living
in a tier 2 or 3 city. Also, if you’ve just had a baby and are starting to plan, you
will have to factor in an inflation of 6-7% to know how much you will need 15-
20 years down the line. We hope this acts as a guide and reminder for you to
start saving for your child at the earliest. Good luck with the planning.

Stage 1: Prenatal Care & Delivery (9 months)

Even before you start a family, start planning the kid’s finances. The nine
months of pregnancy and delivery charges can add up to a hefty Rs 2-3 lakh
depending on whether you are in a metro, the tests you are required to take,
and whether you have a normal or caesarean section delivery.

Healthcare: This will include doctor’s visits and consultation, which can
range from Rs 500-2,000; medical tests (blood, urine), costing Rs 1,500-2,000;
and ultrasound tests (Rs 1,000). These will continue during the three
trimesters and the frequency will depend on your and the baby’s health.
Besides, the mother will need supplements like vitamins, iron, folic acid,
among others.

Mother’s expense: Besides medication and maternity wear, the expectant

mother is likely to spend on massage, exercise or yoga as well. These costs are
optional and have not been included here.
Delivery (hospitalisation): The cost for delivery in a Delhi hospital ranges
from Rs 50,000 to Rs 2 lakh and requires a stay of two to three days depending
on the type of delivery.

House renovation/ new house on rent: If you are in a small, rented house
and want to shift to a bigger one, you could shell out Rs 3,000-10,000 more
depending on the locality. If you are in your own house and want to renovate,
it may require upwards of Rs 20,000, but will be a one-time expense. We have
not considered this expense in other stages as it may be non-existent or may
vary a lot.

Stage 2: Low cost at 0-2 years

The focus is on child’s health and vaccinations, but daycare and nanny form
one of the largest part of expenses, as do functions for the kid.

Healthcare: Most vaccinations are done in the first two years and require
frequent doctor’s visits, which can cost Rs 500-1,500. The vaccines are given at
birth, 2 months, 4 months, 6 months, 9 months, 12 months, 15 months, 18
months and 24 months.

Food: Breastfeeding is usually supplemented with baby formula milk for up to

a year, after which the baby starts taking soft food at home. We have taken the
cost of 50 tins of 400 gm at Rs 360 each for the first year, and regular food
along with 20 tins of food substitutes at Rs 350 each in the second year. We are
also including nursing equipment and clothing for the mother worth Rs
5,000.

Clothes: The newborn needs a lot of change of clothes and outgrows them at a
fast pace. Depending on your budget, you can cut this cost.

Accessories/toys: Besides toys, you buy several items like stroller, walker, car
seat, etc.
Diapers: We have considered 4-5 diapers in a day for two years. Since the price
varies for different sizes, we have taken all sizes of one brand of diapers in line
with the baby’s growth, and their prices for calculating the total cost.

Child functions/parties: Besides the first birthday party, there are religious
functions like name and mundan ceremonies in the first two years. Birthday
parties can cost Rs 10,000-20,000 depending on whether you have them at
home or outside, and the other functions can cost over Rs 25,000.

Daycare/ Nanny: This is one of the highest expenses if both the spouses are
working. A daycare facility can cost more than Rs 5,000 a month, and a full
time nanny Rs 10,000-12,000 a month.

Health insurance: If a Delhi-based couple, aged 30 and 28 years, buys a family

floater plan of Rs 10 lakh, it would cost them Rs 16,000 a year. After including
the child in the plan when he is one year old, they would pay Rs 21,000 a year,
which is Rs 5,100 more.

Stage3: At 3-5 years, school costs rise

Education expenses start from 2-3 years onwards as children start going to
playway school or preschool, and form a large chunk of expenses. Other costs
like those on healthcare, diapers, baby food and accessories come down.
Healthcare: The vaccinations will reduce considerably at this stage and will
comprise 3-5 visits, bringing down this cost.

Food: The food costs will increase somewhat as the growing child will need a
lot of nutrition.

Clothes: This cost can remain about the same, and it’s advisable not to spend
too much on clothes as the child will outgrow them fast.

Accessories/ toys: This cost will come down as accessories like walkers, etc,
will reduce. Child parties: Birthday parties will continue, and you will also
spend on gifts for other kids’ parties. We are considering Rs 10,000 a year.

Daycare/ Nanny: This cost also remains static as you continue to need
support at this age.

Education (preschool): This single expense, introduced from 2-3 years

onwards will eat into your budget. The admission and tuition fees for
preschools in Delhi can range from Rs 40,000-1 lakh a year. This does not
include any other cost related to school.

Transport/miscellaneous: This will include the cost of school bus/private

transport (Rs 3,000 a month), books, uniforms, shoes, projects and extra-
curricular activities, as well as trips that the school will charge separately for.

Health insurance: The cost will remain static at this age: Rs 5,100 for three
years.

Stage 4: At 6-12 years, expenses will rise sharply

At this stage, education costs form the bulk of expenses, with healthcare being
replaced by entertainment, eating out, gadgets and accessories, as the child
begins social interactions and wants to take holidays.

Food: Besides regular meals, the child will want to eat out and have fast food
like burgers, pizzas, soft drinks, chocolates and ice creams. We are taking
around Rs 1,200 a month.

Clothes: We have considered an average spend of Rs 10,000 a year for summer

and winter clothes, which should be bought in a limited manner given the
child’s growth spurt.

Accessories/toys: You will still be spending on toys, bikes and accessories like
shoes, belts, clips, bags etc. As peer pressure begins, the child will want
everything his friends have, which will push you into buying unwanted stuff
as well.

Entertainment/parties: Kids’ birthday parties will pick up force at this stage

and increasing in costs as gifts and return gifts, costumes and food cost more.

Nanny/maid: Your child will no longer go to daycare, but you will still need a
maid to look after the child while you are at work.

Education: This is again one of the most expensive spend categories, with
schools charging an average of Rs 1 lakh a year as fee, besides other annual
charges. We have considered Rs 1.2 lakh a year for our calculations.

Transport/miscellaneous: This will again include school bus fee, books,

uniform and other activities related to school. We have considered Rs 6,000 a
year for books, uniform and other school-related activities.
Extra-curricular activities: This age will also see you pick up tutors for your
child and enrolling them in extra-curricular activities, whether it’s tennis and
swimming, or music and dance classes. We have considered Rs 3,000 a month
for tuition and Rs 2,000 a month for hobby classes for five of seven years,
considering that you start when the child is 7 years old.

Vacation: While you may not take a holiday every year, even a short break of 3-
5 days will cost you at least Rs 50,000 a year. Here we have considered Rs
40,000 a year.

Health insurance: The insurance premium will rise with parents’ age and go
up to around Rs 27,000 a year for a Rs 10 lakh cover including the child. This
will amount to Rs 6,500 more a year. For seven years, it will be Rs 45,500.

Stage 5: At 13-18 years, costs remain high

These six years are again marked by high education costs, besides a surge in
entertainment expenses as the teenagers discover the world and chill with
friends. Nannies, toys and child parties are replaced with eating out, mobile
phones and high tuition costs.

Food: The teens love to eat, especially fast food, and will prefer to eat out with
friends. The food cost will rise in this stage.

Clothes/accessories: They will also spend a lot on their looks and besides
clothes, will splurge on their hair, looks and accessories like shoes, bags and
glasses. This cost will also rise.

Entertainment/gadgets: Another surge will be due to gadgets, be it the

mobile phone, laptop or PC and Xbox or PlayStation. We have considered a Rs
15,000 phone, Rs 30,000 for a laptop, and Rs 30,000 for video games and
accessories. Also included is a bicycle purchase, eating out and parties.
Education: The school tuition costs will remain about the same.
Coaching classes/college applications: The rise in education costs will be in
the form of tuitions, coaching classes and applying to colleges. We have
considered Rs 1 lakh as coaching fee and Rs 1.5 lakh for college applications,
career counselling and consultation. This amount will rise if the child is
applying abroad for higher studies tuitions, coaching classes and applying to
colleges. We have considered Rs 1 lakh as coaching fee and Rs 1.5 lakh for
college applications, career counselling and consultation. This amount will
rise if the child is applying abroad for higher studies.

Transport/ miscellaneous: These costs too will remain static. Extra-

curricular: The hobby classes typically end in Class X when the child starts to
focus on studies. We have considered these classes for four years till the child
is 16 years of age.

Vacation: The holidays too taper off as the child becomes more involved in
studies. We have considered vacations for 3-4 years.

Health insurance: This cost too will remain almost the same.
Stage 6: Education expenses peak at 19-24 years
The expenses at this stage will depend on whether the child goes out
(domestic or international) for education or stays at home. These will shoot up
if he is studying abroad and will be more manageable if he is India. It will also
depend on the type of institution he gets admission in, the stream of
education and length of the course. For ease, we will consider a 4-year B.Tech
course from an Indian university, followed by a 2-year MBA program, all while
living in a hostel.

Clothes: While food will be taken care of in hostel, you will have to pay for
clothes and other minor living expenses.

Higher education: The cost of higher education in India is much lower than
abroad, where you will end up paying around Rs 1 crore for an undergrad
course. Here we have considered an engineering degree from a private
college/IIT followed by an MBA.

Hostel expenses: These can vary a lot, but we have considered a private
college with an average cost of Rs 1 lakh a year.

Health insurance: Buy him a separate plan of Rs 5 lakh, which will cost
around Rs 6,000 a year. You can pay his premium till he gets a job.

( Originally published on Mar 14, 2022 )

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