It's that time of the year when parents will start running around for primary school admissions. With fees ranging from Rs 1.5 lakh in traditional boards to Rs 10 lakh in international boards, school admission is a financial milestone that every parent needs to plan for.
The reality, though, is different. I see school decisions being guided more by social status rather than earning status.
A colleague or neighbour's kids is going to a new international school. We tend to consider the same option. And to cater to this competitive need, an industry of coaching classes that prepares kids for the most coveted schools in mushrooming up. Parents don't think twice before paying lakhs of rupees for admission coaching as well.
Ask this before choosing a School
Let's just pause for a moment and introspect. Ask yourself these questions.
1. What kind of education do you want for your kids?
An academic oriented curriculum so that they could sit for India's top entrance exams OR a well-rounded curriculum which allows them to choose subjects of their interest.
2. What is the Income background of the kids coming to the chosen school?
Do you want to your child to study with kids from a similar income background as you or do you want them to study in a more diverse environment?
3. Can I keep up with the incidental recurring costs of that school?
It's a cost imposed by our peers. Your kids might just end up expecting you to take a foreign vacation every year or eat out at a fancy restaurant every weekend just because their friends are doing it. You might be spending a considerable portion of your salary in meeting these peer demands.
I know of few parents who often complained about these incidental costs and shifted their kids to another school. Another friend plans to shift her son from an international board to a traditional board because there isn't enough focus on maths and science in the new board.
Getting clarity about the three questions listed above, can save you not only time but money too.
Planning for school admissions
Ideally start investing just when your toddler is learning to walk--at least three years ahead of primary school admissions.
Once you are clear about the kind of school and the admission fees, assume a nominal 10% annual hike in the fees. So let's say School Tuition costs Rs 1.5 lakh. Three years later, this amount would be close to Rs 2 lakh (future value of 1.5 lakh assuming a compounded hike of 15% every year). To achieve that target amount, financial planners make a backward calculation.
Assume you are going to invest in a financial instrument that gives 8% annual interest. So the monthly investment you will need to make is Rs 4901 or approximately Rs 5,000.
If you have missed the bus and your kid is ready for primary school, then it's time to liquidate your oldest investments (invested more than 5 years ago) in shares, funds or other financial investments for this purpose. You can start making fresh investments for your next financial goal. Till then, Happy Admission Times!!
About the Author: Rachna Monga Koppikar is the founder of thegreatgruhini.com, India's first personal finance website that helps women navigate through the money maze.
Having swam and mastered the treacherous waters of corporate and personal finance writing, she is now on a mission through her blog to make every Indian woman a Money Savvy Woman and a Money Savvy Mom!