How much does it cost to raise a child in India?

Dec 14, 2018 | 1 month ago | Read Time: 4 minutes | By iKnowledge Team

raising a child

The joy of nurturing your child is unparalleled and this journey becomes even more enjoyable if your finances are well-planned. 

There’s no greater joy than bringing a child into this world. The tiny fingers clutching your hands, those smiles, the first words – everything is a milestone for the new parents. Though having a child is a reason for unparalleled happiness, one needs to also ensure that your offspring lives a good life replete with all the facilities.

Raising a child is not just an emotional and physical investment, but also a financial one. With the cost of education, health care and food rising by the day, it is an expensive affair and not for the weak-hearted. A recent study estimates that raising a child up till his college years in India cost a whopping Rs 67.4 lakh today![1] This is only considering basic lifestyle expenses, school fees and other miscellaneous expenses, since beyond this age, there are many more costs involved in the name of higher education and marriage.

This is a reality check for most couples to plan their finances in advance, in case they are planning to bear a child.

Here’s a low down of the different expenses that a couple incurs during different stages, right from the child’s birth till the completion of his school years:

1.Prenatal, pregnancy and other health care expenses

As a couple, one must be prepared to incur prenatal care charges during the delivery of the child. Of course, there are more costs once the child is born, including his/her clothes, diapers, toys, food and other baby products. This might not sound as a huge expense, but it adds up to other costs and eventually impacts your family’s budget. In terms of healthcare, the first few years will also include vaccination expenses and other medical needs.

During this phase, it is essential to not go overboard and stick to your budget. More importantly, it is advised to start saving towards your child’s goals, be it education or marriage, so that you have enough funds when you need it. Some also suggest a contingency fund that is imperative for emergencies.

2.Schooling expenses

In today’s day and age, school expenses and other extracurricular costs are touching the roof. Most schools in metros charge an annual fee of Rs 1 – 1.5 lakh in good schools. Besides, there are additional costs for other activities, such as art and sports, spends on entertainment, purchase of sports equipment, among others.

It would be much easier if you’ve saved from the beginning, but in any case, you must continue to save and invest regularly for your child’s higher education and other future expenses. Additionally, do not forget about your own retirement and start building a fund so that you can live comfortably whenever you plan to. You should also factor in inflation while investing for your child’s goals or even a retirement plan.

Getting some financial help while paying for your child’s education can be a great relief. If you invest in a child education plan, you get a range of benefits, right from life cover, savings for your child’s future needs and additional riders. You can opt for partial timely withdrawal which allows for funding your child’s school fees and at the same time, avail maturity benefits. Such policies serve the purpose of a one-time investment plan to reap benefits in the long run.

These plans can be customised and make sure that your money is given to your children when they need it the most.

3.Expenditure on higher education and marriage

These two expenses are huge that can severely impact a family’s financial situation. While these expenses can cost anywhere between Rs 50 lakh or more in either case, they can be easily achieved with planning. If you start investing early in a child education fund, even if it’s a small amount, you can reach your target and secure your child’s future. 

In case you pass away unexpectedly during the tenure of the policy, your child can still utilize the funds for his/her secure future. In fact, when you start investing in a child-fund, you are free of any worries when it’s time for him/her to pursue higher education. Besides, this will ensure you don’t have to invest in loans.

Trusted insurance providers like Aegon Life offer plans such as iMaximize that also come with add-on riders, such as waiver of premium, wherein all the future premiums are waived off if the insured policyholder passes away.

Additionally, in case your child requires funds for an emergency, you can avail the partial withdrawal benefit as well.

Lastly, these policies are exempt from tax under Section 80C of the Income Tax Act. Section 10(10D) states that any income earned from these policies will also be tax free.

The minimum age for this plan is 7 years and comes with a choice of two death benefit options—higher of sum assured or fund value; or sum assured, additional savings benefit, and income benefit.

As they say, a stitch in time saves nine. Why wait until the end, when you can give your child a secure future while only shelling out a nominal sum in a year. Sounds like a good plan!

II/Dec 2018/4661


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