5 rules you and your child should follow to manage their higher education expenses
Teach the young ones to fend for themselves. You should only provide the safety net.
The email was blank. No content. The subject line said $$$. The son studying abroad needed money. The parent smiled. It was still the freshman year. Would the smile last in the senior year, if the child asked for more time to graduate and did not know if there was a job at the end of the program?
In many upper middle class households, it is a firm financial goal of parents to ensure the child goes abroad for higher education. Not only can children side-step the rigours of entrance exams in India, but are also exposed to a different quality of education, lifestyle, social interaction and development. Parents and children, both aspire for that experience.
However, not everyone can afford the experience in its entirety. The world of higher education involves too many choices that parents and children are ill equipped to make. The child will seek social networks to find cohorts, seniors and alumni to chat with and figure how courses and credits span out; parents will seek counselors, other parents with experience of sending children abroad, possibilities for scholarships and loans, and prospects for employment after graduating. Not easy, but most plod on optimistically.
The reality check mostly happens with the money decisions. How does one navigate the burden of higher education expenses without ruining relationships and the financial position of the household? Let us propose some rules and talk about it.
First, be upfront with the child about the costs and how much of a dent it will make on the finances of the family, and what is being foregone and by whom. If the family’s wealth will be depleted by Rs 1 crore to fund the education of the child, place it on the table for discussion. How big is this amount compared to the wealth of the family? How secure is the future income of the parents to be able to afford this expense? Does this spend impact the budgets for other children in the family? Does it endanger the retirement goals of the parents? Instead of taking a benevolent view that assures the child that whatever they desire, the parents will happily fund, let it be known how big this decision is for the family. It is also better to state it at the start, than lament in future. Take a loan, if need be.
Second, outline the responsibilities that the child will have to bear. Whether it is in the form of grades they have to get, activities and internships they have to pursue, discipline and diligence they have to exercise, or frequency of communication and information sharing with parents, set the rules. Do not beat around the bush and tell yourself that your child will be upset, or feel monitored, or might dislike your supervision. As long as you are the provider, you have authority you must exercise. Not to the point of straining the relationship, but based on agreed principles. Set them out at the start.
Third, agree on what you will do when things do not pan out as expected. For example, if your child changes his major, and needs to earn more credits, let it be known that you will provide for the additional fees only if they deliver on their work and results. Do not keep it open-ended where the child moves from one major to another, and extends the time to graduate beyond four years, or worse decides to drop off and return, take a break and then pursue something else. You as the parent should know if your finances can afford it. Or, if you are willing to fund these excesses even if you can afford them. Your child must know the bounds within which they can exercise their choices. We are not talking about pressurising the child, but adult behaviour where actions and consequences are understood.
Fourth, make sure your budgeting includes all incidental expenses and you have drawn an upper limit for these items. Not everyone can handle freedom from parental supervision with responsibility. But knowing that there is a limited amount in the bank, and that an email with $$$ on the subject line won’t replenish it, will help them manage finances well. Opportunity cost is working knowledge everyone dealing with money has to learn. If money is spent on food, there is less left over for clothes. Your child has to learn this. Do not try to win a popularity contest, or be needy about approval. Make it a family decision about allocation of money. Get a buy in at the start.
Fifth, ensure your child works and interns while studying. It is easy to dismiss these efforts as time consuming and not paying well enough, or not resulting in firm placements. But your child must know that they are on their own when it comes to finding a job and ensuring they earn money. Do not send your children out to fancy degrees that don’t offer much scope for employment, unless you do not care for it much, or you have enough money to keep funding more courses. Children must know they have to find their feet, and mostly do it on their own.
Financial responsibility for young adults who are 18-25 years old is primarily about independence. They have set out to build themselves— knowledge, skill and attitude—so they can live a life they choose. There is not much for parents to do in this process. This discovery is personal and the victories and failures are the children’s own, to savour and endure. Parents do not know much about the world the child will live in, except being enablers that fund that journey. Keep that equation pleasant and firm.
We live in times of indulgent parenting. Many parents are able to afford everything their child seeks and set them up on a path of privilege. That position should not hamper the ability of the child to be accountable, to themselves, to the family and to society at large. Adulthood is about dealing with the world on your own, and protective parenting should not create artificial bubbles and smokescreens. Let them build themselves with their own hands; you have provided the safety net anyway.
(The writer is Chairperson, Centre for Investment Education and Learning)