Should I plan for my child’s PG education costs in addition to UG?

Published: May 25, 2021 at 10:01 am

Last Updated on May 25, 2021 at 10:01 am

I received this question from a reader who prefers anonymity. “Dear Pattu sir, I recently became a parent and started investing for my son’s college education expenses (UG). I am debating whether to include post-graduation (PG) costs into my goal. I did my MBA with an education loan. The fear of completing that loan made me financially responsible from the day I got my first salary. I am thinking of doing the same for my son. Am I thinking along the right lines?”

I had a couple of questions before I could answer: (1) Did you get an education loan because your father could not afford the PG fee or because your father wanted you to learn responsibility? Answer: His father could not afford the fee. (2) Do you think you will be able to afford the PG fee for your child? Answer: I think so. My son has just turned one now. I should be able to pull it off.

We are all victims of our good and bad experiences. We tend to believe what happened to us made us better and therefore that is the right path for our children. My transition from school to employee will therefore heavily influence my opinion on this matter. This question cannot be answered using data and analysis. I was asked for my opinion and this is it. Your experience and therefore your opinion may differ.

I had once written an article titled What if our children never had to work! As usual, many read only the title before criticising my view and among those who read it very few understood what I wanted to say. I recall this here because it is a closely related topic.

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Before we begin, let us eliminate the obvious possibility. If we cannot afford to pay the PG fee (even after investing regularly, early and right) then the choice is obvious. IF the kid wants to study further an education loan is the only choice. We are not discussing this here.  Mr anonymous is considering an education loan even if he can afford to pay PG fees. Also, this depends on what the child wants to do after college.

As mentioned above, I am a victim of my good experience and I think it is worth share it here. I finished school in 1992. I got my first salary as a proper employee only in Feb 2006. My parents were lower-mid to mid-level government employees. Their pay was enough to make ends meet but not pay for fancy college fees.

Even though the IIT Madras MSc fee was (relatively) less than an Engineering fee, they had trouble sourcing it. My dad retired when I start my PhD. Even after two short stints abroad, I could only compensate for the airfare and other sundry expenses. Meaning I had nothing left, so did they! The stipend I got as a research fellow was spent entirely on my commute.

During all this time, my parents were a solid source of support. If I had started earning earlier, I could have made a difference to our finances but they were adamant that I finish my PhD, finish my post-doctoral experience and get a proper job. This cushion of money and time they constantly provided me for 14 years after school is the only reason I am what I am today.

If my parents could do it with barely any networth to speak of, it would be criminal if I with much better finances (because of their sacrifices) do not do the same for my son. This is what I meant in the above article. Provide our children not just money for fees but also time. Of course, there two are not strictly independent. Time requires money!

Time to find their calling, time to find themselves. Time to establish themselves as independent professional. Time to establish themselves as entrepreneurs. Time to hone their creativity.

Many of us make the mistake of assuming the child will be a salaried employee in future while planning for their future. We almost take this for granted. If the child is super clear about what she wants to do, then there is no issue. What if the child does not know what to do?

Do we push them into the usual “safe” route of BE + MBA? Or do we give them time, at least a year after school to figure themselves out? This is where our own networth makes a difference.

I often meet extremes among the students seeking career advice. They want to start PhDs when their parents are retiring or they want to start working after a BE even if there is no hurry for them to work and the parents are fairly well off.

I strongly believe that if we can afford it, we must not only pay for PG fees but also give the child time to find themselves. This process should start at a very early age.

Jack Ma (chairman Alibaba group) says we must work happily and live seriously. As parents, I believe we must do everything possible to ensure our children work happily and live seriously. An education loan is not necessary to teach a child responsibility or financial prudence. Then are plenty of other ways to do that.

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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