Do you remember the feeling that you had when you first held your child in your arms? Some say it was happiness, others say it was responsibility. A part of this sense of responsibility is to provide everything to the bundle of joy. According to a study conducted by Principal Retirement Advisors, children’s education and marriage was the top most financial goal (68%) across age groups of respondents, followed by buying a house (57%).
Mint spoke to some soon-to-be parents and new parents to understand how they plan their finances to meet their children’s needs, including day-to-day expenses, education and marriage. Here is what we found, along with suggestions on what to do to meet these financial goals.
In good faith Most parents depend on existing income for the day-to-day expenses. Mumbai-based Prianka Singh, 34, a stay-at-home mother to four-year-old Eva, and expecting her second child in two months, said, “We all know that there will be immediate financial needs such as medical care and other expenses when you are going to have a baby. We are dependent on my husband’s current income for these.” However, for the long-term needs such as education, she prefers to invest in equity.
While Singh’s choice of investment is equity, many parents choose to invest heavily in fixed deposits, insurance products and physical gold for long-term needs. Dubai-based Sreeja V. Ramachandran, a 30-year-old homemaker and mother to four-year-old Dakshina, is one of them. “We have an insurance policy and a couple of fixed deposits to meet the education needs of our child. I also invest in the form of physical gold coins every year for my daughter. These gold coins are for the marriage kitty,” said Ramachandran. Then there are those who invest only in real estate. “I have a daughter and a son. I only invest in real estate. So far, I have bought three plots near my house,” said Thrissur-based Jayan Raman, 45, who works with Kerala State Electricity Board Ltd. His daughter Archa is 5 years old and son Aromal is 6 years old.
When asked why he invested in real estate, he said, “Frankly, I don’t understand financial products such as equity. My father used to invest in land and the value of the property he bought has appreciated. I hope that the plot I have bought will also appreciate in value.” Parents try their best to provide for their children, even if they need to compromise in other areas. The blame for the trend can partly be attributed to peer pressure. “Many parents today are making choices that are steadily ratcheting up the amounts they spend on their children, be it for education or leisure. They are also losing sight of what is going on and are constantly trying to push their purchasing power,” said Chandni Parekh, a Mumbai-based social psychologist.
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