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You're listening to a Mint

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podcast brought to you by

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HD Smartcast. Hello

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listeners, welcome to the latest episode

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of why not meant money. I'm

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your host, Chash Kriplani. Financial planning

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for your child's education is more

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important than ever before, given the

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rising cost of school education as

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well as high school education. And

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if you add specialized education fields

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like medicine and engineering, the cost

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could easily multiply. Also, education inflation

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is much more than your regular

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inflation. So you need to be

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financially prepared accordingly. In today's episode,

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I'm joined by Sunita Satapati. with

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the director of Glossom Wealthx.

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Welcome to Why Not Mint Money,

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a personal finance podcast where

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we help you understand basic money

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concepts and share strategies for

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you to build your wealth. So

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let's get started with your

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money journey. Welcome

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to the latest episode of Why Not

0:59

Mint Money. We wanted to chat with

1:01

you about why parents should prepare much

1:03

in advance about their children's education and

1:06

how they should go about it. the

1:08

dynamics of parenting and the financial

1:10

planning have shifted significantly. Planning ahead

1:12

is not a luxury anymore. It

1:14

is a necessity to me. So

1:16

when the child goes to the

1:18

school, along with the school, they

1:20

have different classes, different extracurricular

1:22

classes which are exorbitantly priced. So

1:24

for that, parents have to do equally

1:27

good planning and then school education,

1:29

the parenthood is now getting a little

1:31

delayed. So that is the time

1:33

when the parents have to pick up

1:35

their career when the child is

1:37

17 years old. And at that time

1:39

to pull out the money from their

1:41

savings and give this child, it's a

1:43

very difficult proposition and also not an

1:45

advisable proposition. So in that scenario, don't

1:47

you think it's better to start planning when

1:50

the child is when you are just pregnant.

1:52

Unlike earlier generation where the parents

1:54

used to think about child's

1:56

expenses when he or she starts

1:58

going to the high school or

2:00

college level but today actually the

2:03

parents need to plan their finances

2:05

of the kid when they're planning

2:07

a child preschools also are very

2:09

very exorbitantly priced also when the

2:11

child gets so preschool is a

2:13

part where the parents has to

2:15

focus and post the preschool actually

2:17

today generation there are lot of

2:19

opportunity for the schools. There are

2:22

some different international boards, there are

2:24

ICSE, CBSE, different boards and also

2:26

there are some residential schools now

2:28

as started. So all these things

2:30

are going to be very very expensive

2:32

so then that needs that calls

2:34

for the parents to start their financial

2:36

planning exactly when they start their

2:38

child plan so it goes parallel today

2:40

because all of a sudden you

2:42

can't pull out so much of money

2:44

and the money is not a

2:46

one time it is going to continue

2:48

for the rest of the life

2:51

today you are in the education the

2:53

school and tomorrow you'll get into

2:55

college then it's a professional education Sunita

2:57

can you also talk to us about

2:59

you know the higher education in terms

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of, you know, if somebody wants to

3:03

get into specialized education like, you know,

3:05

medicine, you know, get into a specialized

3:07

medical field. engineering or like

3:10

you said go abroad what kind of

3:12

course are we talking here we need

3:14

to see if a child wants to get

3:16

into medicine or a child wants to

3:18

get into engineering or a child wants to

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get into like you know different kind

3:22

of professional courses so if a child wants

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to go to medicine so it is

3:26

a minimum of 10 years studies so the

3:29

today's the medical colleges are charging if

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it is getting into a private medical college

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decent private medical college fee is almost

3:35

Only the tuition fee, I'm not talking about

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the other expenses. The tuition fees are

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somewhere like, you know, one a half crores

3:41

to two crores. So you have to

3:44

keep a buffer for that. And that is

3:46

for five years of medicine. I'm not

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talking about again your specialization. Right. And

3:50

also we are talking about the tuition fees

3:52

today as over the next 10 years that

3:54

tuition fee will also go up because of

3:56

just inflation. One thing is very, very

3:58

critical. We have to take care of the

4:00

inflation part. Today's 2 crores and after

4:02

2 years, the rate of 6 % inflation,

4:04

if you get, it will be much,

4:06

much more figure. So we cannot think

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of what is today's expenses. We

4:10

will have the same after 15 years.

4:13

So the inflation rate is going to like

4:15

normally when you do any financial planning,

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it is a 6%. So we have to

4:19

give 6 to 7 % inflation. Right. But

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I believe the education inflation from

4:23

what I understand is even twice that,

4:25

twice the regular inflation. So we

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are talking about 12 to 14 %

4:30

education. At least 10 % we should

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keep in mind at least 10 to 12.

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And with the competition coming, you can

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add 2 % more for different different things,

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you know, maybe before this is the cost

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we are talking about to get into

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that institute, you also have to do a

4:45

lot of other courses like, you know,

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there are different classes to get into IITs

4:49

of the world. Like once you go

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to IIT, that is the tuition fees. that

4:53

involves and then the hostel and then

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there are different structures. But to get into

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that course also you have to go

4:59

for different classes, different tutorial classes,

5:02

coaching classes, so which also is

5:04

exorbitantly priced today. And a lot of

5:06

times in our country people after

5:08

doing engineering they do MBA, MBA courses

5:10

sometime. One year it is only

5:12

30 to 40 lakhs in a good

5:14

MBA institute. So it is a

5:16

total 50 to 60 lakhs expenses plus

5:18

your engineering expenses plus your coaching

5:20

classes. And all these things we are

5:22

talking today's the day so after

5:24

10 years 15 years when you're saying

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with inflation adjusted 67 % is natural

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but normally on education field we

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say 10 plus 2 % is all

5:32

these things so 10 to 12 %

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inflation cost one has to add that

5:36

inflation cost and see what is

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the money I need at those times

5:40

to make my child get educated so

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basically today we do not know

5:44

at a at four five years age

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whether the child will be getting

5:48

into hence I feel like you know

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starting investment for the child when

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the child is born is an essential

5:55

today because you need to have

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the corpus once the child is into

5:59

seventh or eighth grade we get to

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know she or he is more

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inclined to get into medicine or uh

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engineering hence medicine if you have

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to do so medicine you have to

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maybe put little more money than

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engineering till seven eight standard normally we

6:13

do not know what a child

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will get into it so till the

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child is seven eight standard, we

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have to ensure that the corpus has

6:22

been built. Because as we all

6:24

know theory of compounding, time we give

6:26

money, we get more money. We

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have to give time to the money

6:30

to get it compounded. I request

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all the young parents who

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invest for the kids without a

6:36

wettling an eyelid because not

6:38

a luxury anymore. It is a

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necessity. if you are looking at

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a foreign education, which comes to about

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40 -45 lakhs annually. So that's also

6:46

a lot of cost, I mean, if

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it is a half crore in two years,

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including the tuition fee and the hostel

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fee. My friend just paid one a

6:55

half crores for one year. Oh, for

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one year? For one year. I mean, 14

6:59

months to be specific. So basically you

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can say 75 lakhs per annum. What

7:03

happens is because of the new boards that

7:05

are there, you know, international boards, like

7:07

you mentioned and... You know, lot of

7:09

these preschools have come up, lot of

7:11

playgroup have come up just to cater to

7:13

international boards because... of the high competition

7:15

getting into limited you know a lot

7:17

of people have this you know fascination

7:19

and rather and and maybe it's it's

7:21

right also I mean in some cases

7:23

international schools also do well and they are

7:26

probably some parents are already planning international

7:28

education so for them it makes a

7:30

lot of sense so my question to you

7:32

is that even that they need to

7:34

keep in mind right because the play

7:36

groups that help you get admission into

7:38

those international schools because you know there

7:40

are going to be interviews because especially

7:42

in good schools so they are charging

7:44

a lot those places absolutely correct if you

7:46

want to send your child if

7:48

you decided the child should go abroad

7:50

to study then you have to

7:52

be very very clear from the beginning

7:55

of the of his or her

7:57

life there are preschools which are meant

7:59

for some of the higher schools and

8:01

those schools are suppose preschool you study

8:03

A and that preschool is like no

8:05

sending kids to the B which is

8:07

and that B school is sending kids

8:09

so it is a good transition and

8:11

some preschools are meant only for that

8:13

it's a very big competition and also

8:15

it is that way priced you know

8:17

so there are if you want your

8:20

child to go abroad then you have

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to make it backward planning and ensure

8:24

the child is getting to that preschool

8:26

right and my point earlier was you

8:28

know because of currency exchange and plus

8:30

if you add inflation the overseas

8:32

education that is costing today will also

8:34

multiply significantly if you're talking about

8:37

next 10, 20 years. So that's what

8:39

I'm saying, you know, so with the inflation

8:41

going, so suppose inflation, you

8:43

keep the education influences 10 % and another

8:45

2 % for this. So just keep

8:47

it for 12 % for the second. And

8:49

today's two crores after 10 years or

8:51

after 15 years. So for that, we'll

8:53

have to backward planning now. And Suneeta,

8:55

where do you think investors should be

8:57

investing in what vehicles to

8:59

prepare and plan for their children's

9:01

higher education? Parents can select

9:03

the diversified equity funds for

9:06

long term compounding, especially for

9:08

the child's higher education. Equity

9:10

typically offers decent inflation adjusted

9:12

returns if you look at

9:14

historical data. And for the

9:16

medium term and short term,

9:18

parents can use definitely debt

9:20

funds. Great Sunita, thanks a lot

9:22

for joining us today and sharing all those

9:24

insights for our listeners. Thank

9:29

you listeners for joining us today. If

9:31

you liked this episode and would like

9:33

to hear more such interesting conversations, do

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log in to our channel, Why Not

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you can DM me on Twitter.

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