INSURANCE

LIFENEEDS DURING YOUR

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.

0-4 yrs 5-8 yrs 9-12 yrs 13-16 yrs 17-21 yrs

00 5 12 21

has been the rise in infl ation in primary and secondary education from 2005 to 2011, according to a survey by Assocham.

THE ASSUMPTIONS WE MADE IN CALCULATING THE COST OF RAISING A CHILD

Education expenses have risen faster in metro cities compared with that in tier 2 and 3 towns.

TEXT: BABAR ZAIDI PHOTOS: AMRENDRA JHA, SHOME BASU

20 The Economic Times Wealth, April 18, 2011 Learn & Keep

How much it costs to raise a child50%of the total expense on healthcare is incurred in the fi rst three years of the childs life.

3timesthe total healthcare cost is what parents spend on a childs entertainment. This is mostly due to the high cost of gadgets, such as mobile phones, that children consider essential.

SOME EXPENSES RISE FASTER THAN OTHERS

25 lakh

20 lakh

10 lakh

100%

70%

50%

30%

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.

HOW EXPENSES CHANGE WITH AGE

Miscellaneous

Transportation

Healthcare

Food

Entertainment

Education

Clothing

Housing

Basic expenses include housing, clothing, food and miscellaneous costs.

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.

`4.86 lakh `7.93 lakh `9.42 lakh `11.46 lakh `21.08 lakh

The calculations are based on ET Wealths estimates of bringing up a child in a middle-class household in urban India.

HOW MUCH AND ON WHAT WILL YOU SPEND IN RAISING A CHILD

TOTAL:

`54.75lakh}{

MISCELLANEOUS3% `1.64 lakh

ENTERTAINMENT12% `6.57 lakh

TRANSPORTATION5% `2.74 lakh

HOUSING19% `10.4 lakh

FOOD5% `2.74 lakh

HEALTHCARE4% `2.19 lakh

CLOTHING6% `3.29 lakh

EDUCATION46% `25.19 lakh

169% Education costs shoot up if a child joins a professional course.Entertainment expenses rise faster after the child enters his teens.

Entertainment is a major ex-pense, higher than healthcare and transportation combined.

Age in years

Am

ount

(`)

A couple can live in a one-bedroom fl at, 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.

HOUSINGHealthcare costs are higher in the initial years when a child gets vaccinations.Pre-natal and mater-nity expenses have also been included. We have assumed that the child will not suffer any major illness and have included a health insur-ance cover of `1 lakh.

HEALTHCAREChildrens clothes are expensive, sometimes costlier than their parents clothes. And you need to buy them frequently in the early years as children out-grow their wardrobes fast. Our estimates include all clothes, including school uni-forms and shoes.

CLOTHINGEntertaining 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 con-nection, cable TV, go-ing to the movies, CDs, DVDs, cell phone bills, holiday trips, etc.

ENTERTAINMENTThis 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 gradu-ally tapers down. Food does not comprise a major expense in the total costs.

FOODWe 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.

EDUCATIONWe 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.

TRANSPORTATIONAn additional member means extra living expenses. More elec-tricity consumption, fatter telephone bills, more soap, tooth-paste, etc. This also includes the higher wages payable to servants for child care in the initial years.

MISCELLANEOUS