Foreign education: Make sure it doesn't jeopardise your retirement planning

Updated: 08 Oct 2022, 11:00 AM IST

An education fund cannot be treated like the good old recurring deposit with a bank. You don’t issue a standing instruction and then forget about it. Read further to know more

Foreign education: Make sure it doesn't jeopardise your retirement planning

“Don’t you think this whole business of educating children abroad is a little overrated?” Singh asked me. He had sent his son abroad with a lot of hope. Now, years after finishing his graduation, the son was without a steady job and struggling to support his own family. And his father and mother back in India were having to continue to work, well past their retirement age, to repay the loan.

Five years ago, Swamy was looking forward to his retirement. Until his only daughter upset his plans. She was a skilled dancer and was keen on perfecting her art at a ballet school in Paris. Her father was thrilled and encouraged her. “I only wish she had given me some notice,” Swamy told me later. He ended up requesting his employer for an extension and is now juggling two part-time jobs.

Think I am building a case against sending your children abroad for education? Far from it! My case, if you can call it that, has more to do with you parents than your children.

Self-care before the airfare

This is not a new trend. Children have been going abroad for education even when the cost of education in India was a fraction of what it is today. That the grass is greener out there might come across as a truism but need not be the truth.

Academic merit and a pinch of luck apart, how things turn out depends largely on how well the parents have planned the move financially and on the less quantifiable aspect of the culture (or mindset) the children have imbibed.

As most parents would agree, children these days know their mind early and tend to set their goals high (wait till I tell you about Jina). Studying abroad is often part of that goal. Whether that stems from a sense of entitlement or is bolstered by the willingness to work hard and make sacrifices is a function of that intangible culture.

There is nothing intangible about the advice I give every parent set to make their children fly to get their graduation cap. Always follow the routine pre-flight announcement: put on your own oxygen mask first. When it comes to putting aside a little for your child’s education, provide for your retirement first. If only Singh had done that!

An education fund cannot be treated like the good old recurring deposit with a bank. You don’t issue a standing instruction and then forget about it. As with any fund, you will need to re-evaluate the growth periodically and reallocate when required.

Let us not forget, we also need to provide for the extra element of currency risk. That means extra vigilance. If your financial advisor suggests some steps that sound radical, try to understand the rationale. There are always multiple variables to consider and goal posts do tend to drift.

Start early, stay flexible

Joe’s son is barely six years old. In the last meeting he had with my colleague, Joe insisted on starting a US education fund for the child. Too early, you think? That’s what the advisor thought too. But Joe was clear. “If I start now, I only need to put aside a little amount every month. Later, it may be too late and I don’t want either of us to carry the cross of a loan when we can least afford it.”

Let’s say the child gets a scholarship that takes care of everything. Will the fund be wasted? “No way,” Joe is very clear. “We will have a few international vacations together as a family.”

What if things go wrong, say the income flow thins or stops? Then the advice we give for every goal-specific fund comes into play. Be ready to drop the goal, delay it or compromise on the objective. If the objective was education abroad, maybe you will have to settle for a college in India and only provide for domestic relocation.

If the case of Singh we began with was an example of things going wrong, the developing story of Jina is a textbook model of everything going right so far. She is still in high school. She lives and breathes physics. She may stick to the prescribed textbooks on all other subjects but her reading on physics is far advanced. She is already set for Princeton and makes her pocket money by tutoring younger students.

I advised her parents to start setting aside money for her higher education ever since she started showing signs of being extraordinary some years ago. Then physics took over and they firmed up the university, requiring only minor changes in the funding pattern.

I have a strong feeling she is headed for the nobel one day. Much as I would love it, it is highly unlikely I would find a mention in her acceptance speech. She does not yet care for finance, and I am yet unable to answer the physics questions she fires at me, whenever we meet.

Ready to plan for foreign education for your child/children? Book your free consultation here.

Names and genders have been changed, but all these cases are real. As real as how prudent financial planning can help you achieve your goal, including education in a reputed university abroad for your child. Or, maybe for yourself?

Lovaii Navlakhi is the Founder and the CEO of IMMPL. He can be reached here.

Note: Money Tales of Lovaii with MintGenie is a series that helps investors make better sense of their money. Our aim is to help you make better saving and spending choices.

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First Published: 08 Oct 2022, 11:00 AM IST