20
Learn & Keep
INSURANCE
NEEDS DURING YOUR
The Economic Times Wealth, April 18, 2011
How much it costs to raise a child
LIFE
You can buy two swanky BMWs, a luxury penthouse or take annual
vacations to exotic locales for the rest of your life. Or, you could bring
up a child. ET Wealth works out the cost incurred by middle-class
parents in raising a kid from cradle to college, that is, till he is 21.
HOW EXPENSES
CHANGE WITH AGE
As your child grows, so do
his demands. With every
passing year, some of
his needs increase, while
others wane. For instance,
healthcare costs are
the highest till the child
is 4 years old, whereas
education costs form a
huge chunk of expenses
between 17 and 21 years.
3% `1.64 lakh
MISCELLANEOUS
HOW MUCH AND
ON WHAT WILL
YOU SPEND IN
RAISING A CHILD
12%
`6.57 lakh
19% `10.4 lakh
100%
`4.86 lakh
`7.93 lakh
`9.42 lakh
`11.46 lakh
`21.08 lakh
70%
3
50%
5% `2.74 lakh
Miscellaneous
Entertainment
Transportation
Education
Healthcare
Clothing
Food
Housing
times
the total healthcare cost
is what parents spend on
a child’s entertainment.
This is mostly due to the
high cost of gadgets,
such as mobile phones,
that children consider
essential.
30%
TRANSPORTATION
5% `2.74 lakh
FOOD
0-4 yrs
5-8 yrs
169
%
6% `3.29 lakh
CLOTHING
54.75
{`
lakh
}
has been the rise in
inflation in primary and
secondary education from
2005 to 2011, according
to a survey by Assocham.
9-12 yrs
13-16 yrs
Education expenses have risen
faster in metro cities compared
with that in tier 2 and 3 towns.
25 lakh
SOME EXPENSES
RISE FASTER
THAN OTHERS
20 lakh
Education costs shoot
up if a child joins a
professional course.
Basic expenses include
housing, clothing, food and
miscellaneous costs.
Entertainment is a major expense, higher than healthcare
and transportation combined.
Entertainment expenses
rise faster after the child
enters his teens.
10 lakh
4% `2.19 lakh
17-21 yrs
Amount (`)
The calculations
are based on ET
Wealth’s estimates
of bringing up a
child in a middleclass household in
urban India.
TOTAL:
%
of the total expense on
healthcare is incurred in
the first three years of
the child’s life.
HOUSING
ENTERTAINMENT
50
HEALTHCARE
Medical costs are high in the
initial years, but they remain
low if there is no major illness.
Transportation is not a big
expense, but grows at a steady
pace till the child becomes
independent.
46% `25.19 lakh
EDUCATION
0
0
5
Age in years
12
21
THE ASSUMPTIONS WE MADE IN CALCULATING THE COST OF RAISING A CHILD
HOUSING
FOOD
CLOTHING
TRANSPORTATION
HEALTHCARE
EDUCATION
ENTERTAINMENT
MISCELLANEOUS
A couple can live in a
one-bedroom flat, but
will need a bigger house
when the child arrives.
We have assumed that
after a child is 4 years
old , a family will rent
at least a two-bedroom
house, which will add
`2,000 to the monthly
expense.
This includes
everything a child
eats. In the initial
years, the expense is
relatively high because
of the specialised diet
requirements of an
infant, but it gradually tapers down. Food
does not comprise a
major expense in the
total costs.
Children’s clothes are
expensive, sometimes
costlier than their
parents’ clothes. And
you need to buy them
frequently in the early
years as children outgrow their wardrobes
fast. Our estimates
include all clothes,
including school uniforms and shoes.
We have included the
cost of travelling to
school, college and on
family holidays. This
may go down when the
child becomes older
and starts using public
transport. However, he
will not be eligible for
discounted rail and bus
fares that apply to kids
below 12 years.
Healthcare costs are
higher in the initial
years when a child
gets vaccinations.
Pre-natal and maternity expenses have
also been included. We
have assumed that the
child will not suffer any
major illness and have
included a health insurance cover of `1 lakh.
We have included
everything relating
to school and college
education. We assume
the child studies in
a public school. The
costs include tuition
fee, books, stationery,
coaching, school trips
and functions. Uniform
and transportation are
calculated separately.
Entertaining your child
takes up as much
money as you spend
combinedly on feeding
and clothing him. It
includes the amount
spent on toys, story
books, Internet connection, cable TV, going to the movies, CDs,
DVDs, cell phone bills,
holiday trips, etc.
An additional member
means extra living
expenses. More electricity consumption,
fatter telephone bills,
more soap, toothpaste, etc. This also
includes the higher
wages payable to
servants for child
care in the initial
years.
TEXT: BABAR ZAIDI
PHOTOS: AMRENDRA JHA, SHOME BASU