Are You Planning a Big Fat Wedding for your Kids?

First of all, let me clarify that I am not advising you on how much you spend on your child marriage. The choice is all yours. You can spend 5 Lakhs, 10 Lakhs, 20 Lakhs or 1 Crore. The message of this article is different.

I want you to think, what can be done if you reduce your expenses on child marriage?

Corporate jobs are getting stressful. Our parents worked till the age of 60. Today`s generation is thinking of retiring at the age of 50 years. I am not sure if our children would be able to take the stress even till 45/50 years.

I have done financial planning for more than 400 people in the last 9 years and what I have come across different types of clients

1. Some clients want to spend more on children marriage than child education.
2. Few want to spend the same amount on as on education.
3. Some want to spend less on marriage.
4. Few do not want to spend anything for marriage, their goal is to provide maximum to the child education.

Now, as I said in the beginning, the choice is all yours. You are the best judge of your finances.

But I want to ask a question to those who want to spend lavishly on their child marriage. Is it worth for a 1/2/3 day’s affair? The question is mainly for those who run neck to neck to achieve their financial goals, mainly salaried class. I can still understand, a business class spending high amount on marriage as they need to build relationships and network.

Let me take a case study where you want to spend 25 Lakhs on child`s marriage in today`s cost, after 24 years. I am assuming that for rest of the goals like child education and retirement, you are already investing enough.

Child Marriage – 25 lakhs – Today`s cost

Inflation -6%, Time – 24 Years

Value of 25 lakhs after 24 years at 6% inflation would be around 100 Lakhs.

So, you are going to spend this amount for 1/2/3 days happiness.

And how much you have to save monthly to create the required corpus – 9,000 per month assuming a return of 10% in equity mutual funds (Of course, rebalancing would be required from time to time)

Not a big amount, Right!

Also Read : Retirement at 45 in India

Now, how does it is related to your child future plan?

Let me elaborate, one fine day, you decided that you will spend only 50 Lakhs on child`s marriage and will invest 50 lakhs in mutual funds for the safety of the child.

Let us see how this 50 Lakhs will grow in future

Do I need to say anything? Do you realize what can be done by just reducing the marriage expenses to half?

Now let us take this to a further level

You want your child to retire at age 50, I am assuming the current age of child as 1 years and he will start investing at age 25 (the same time when you are investing 50 lakhs for his future.

Current cost for retirement per month – Rs. 30,000

Cost of 30,000 at child `s age 25 years – 1.2 Lakhs

How much your child needs to invest for attaining this goal?

Current Age -25 Years

Retirement Age – 50 Years

Life Expectancy – 85 Years

Value of 1.2 Lakhs at age 50 at 6% inflation – 5.20 Lakhs

Corpus Required – 18.42 Crores

Since the child is already having 5.42 Crores in hand at age 50 – Balance required would be 13 Crores

To achieve this 13 Crores in 25 years, the child needs to invest approx. 1 Lakh per month when he starts investing.

Do not get shocked, this 1 Lakh in today`s value is only 25,000

My intension is not to convey the message that invest for your child`s retirement.

My intension is to show that how stress can be reduced in your child`s life atleat in terms of financial life.

All the calculations and assumptions are very subjective here. Inflation may come down, returns may reduce etc. But I want you to think on this perspective. Do let me know your view.

Till then Happy Investing!