Most parents wish they were better prepared for their child's university education and regret not having planned earlier and saved regularly
Indian parents are spending more than ever on their children’s education. A recent report, titled The Value of Education, the Price of Success, by HSBC said the cost of higher education is being financed by parents by sacrificing personal time to earn the extra money needed to send their children to university. The study said one in two parents take up a second job or work for extra hours to get the money needed. HSBC polled 505 parents and 100 students in India for this report, and 10,478 parents and 1,507 university students across 15 countries and territories.
“Tuition fees is only one part of the expense. If the child is abroad, and if they want to visit home at least twice a year, travel cost itself is quite high," said Priya Sunder, director, PeakAlpha Investment Services Pvt. Ltd. “Not taking into account the living expenses is one of the most common mistakes people make while planning their child’s education."
The study said Indian students spend more on clothes and make-up than they do on books during the course of the degree. Eating out and takeaways make for the next big spend. Educational tech purchases like laptops make for a large chunk of the total expense. However, globally, students spend most on paying credit card bills, personal loans and student debt.
Considering what parents contribute and how much students end up paying, there is still an average gap of ₹ 4,15,679. To fill up this gap, parents take loans, work extra hours or take up an additional job, or even borrow from friends and relatives. Students too rely on part-time jobs to make up for costs, by spending an average two-and-a-half hours in paid jobs each day.
About 79% of parents fund their children’s university education from their regular earning rather than savings, said the report. Most parents end up sacrificing on personal time and leisure to be able to back their children’s higher education. They take fewer number of holidays and prefer low-cost vacations. About 64% parents have taken on some kind of debt for their child’s university education.
“If you haven’t planned well in advance, never take a loan or exhaust your assets and retirement savings to fund the education cost because this will force you to compromise your financial independence in the future," said Sunder.
Most parents wish they were better prepared for their child’s university education and regret not having planned earlier and saved regularly. About 35% of parents worry they are not financially strong enough to support their child’s higher education.
At a time when people are laying more importance on university education and with students becoming more career-oriented than ever, parents are expected to plan their finances well to accommodate education-related expenses with little or no burden.
About 85% parents who have their child studying at a university agree that investing in higher education is worth their money.
Follow these steps
Usually university education is expensive. Be realistic while planning for your child’s education; take all costs into account. Today, many students spend more on lifestyle expenses, so discuss this with your children to ensure better financial planning. Guide them on how to cut costs and encourage them to use budgeting tools like apps and calculators, said the report.
Also, start planning early to help your child make it to the university of her choice without having to strain yourself with loans. Seeking help from a financial planner is one way to make informed choices, added the report.
“You must have a time period of at least 8-10 years to make enough investments and for equity to play out in terms of added returns. Anything less than that, and you will be at risk," said Sunder.
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