Retirement Planning Vs Child Future Planning

I keep repeating this very often – I was talking to a client who was approaching his retirement very soon – both of his parents are alive. I asked “do your parents stay with you” & he politely said, “NO, we stay with our parents”. This one line created a lot of respect for the client but the question is will we be that lucky in our retirement days.

Do you know that the major reason why people take loans on their PF or withdraw their retirement savings is due to a child’s educational needs or for the child’s marriage? When we talk about the long-term goals of any person, normally his 2 primary goals are:

  • Children future planning
  • Retirement planning

And irony is that people mix these two goals – at least the funding part. These are two separate goals which have a long term horizon but still lot of people fails to meet these goals. In India we also see a common phenomenon that when it comes to funding child’s education, people are very reluctant to go for education loan which is a right way to fiancé this goal. Instead, they dig their retirement corpus or borrow from other sources. Some also give lame excuses like “my son will take care of me when I am old”. And we all know the present reality & future can be even dramatic. Hence,these two goals if not properly planned and executed can screw the financial life. And, worst is one will realise this when he has lost the most important fact called “time”.

Let’s try to understand these two goals, their interdependence and implication on overall financial planning:

Planning tenet


Example in terms of  goals

Child Future 1)      Planning for education.2)      Planning for expenses in case of casualty to bread winner.3)      Marriage planning. 1)      Plan for IIM whose current fee is Rs 15 lakhs.2)      Life covers of at-least 10 times of CTC with proper allocation to disability and accidental death cover.3)       Planning for marriage of daughter. Cost of marriage today Rs 10 lakh.
Retirement 1)      Providing funds for a decent lifestyle.2)      Planning for health related expenses. 1)      Providing for monthly expenses whose current value is Rs 25000/-.2)      Providing for treatment of any major ailment or surgery. Present cost Rs 400000/-.

Important Points for Child Future Planning:

1)      The first important phase when child will have financial needs is when he appears for his 10th and 12th board. The subjects that he chooses give you a fair idea about how much money he will require when he joins a UG and PG course.

2)      Second phase comes when child takes admission to his professional course. The course and the number of years the course will take, have an important bearing on the amount that will be requiring. Also the choice of college is important, as MBA abroad will be more costly in comparison of pursuing the same course in India.

3)      Encourage child to avail an Education Loan in case the requirement is more. There is no negative such as “burdening the child, before s/he starts a career” thing. Instead child learns to be disciplined in finance besides gaining tax advantage when his repayment starts.

4)      Check if you really need to plan for marriage or not. Late marriages are also common. Now a day’s youngsters are settling in career and then getting married. S/he can also partly/fully fund the wedding.

Important Points for Retirement Planning

1)      Unlike child education expenses, you are not planning for one-time expense. The amount is normally required on frequent basis till the person survives.

2)      Now a day factors like longevity of life, better life style and costly medical needs need to be considered for retirement planning.

3)      Time of retirement and income flows after retirement is also important to consider. Today people plan to retire by 45 or 50 and start their own ventures. They call it retirement but actually this is just a shift in career as the income continues. Also we find executives like AM Naik (L&T) who is 70 but still has a long to-do list.

4)      Retirees today believe in “sar utha k jeeyo”. They like to be independent rather being on the mercy of their children.

5)      Also remember that for educational need you can get assistance (loan, scholarships etc.), but for retirement needs no such facility is available.

I read something interesting & would like to share that.

You don’t need to save for Child Future Goals if…

If you take the time to really focus on parenting your kids in a way that makes them functionally independent and critically thinking adults, you don’t need to save for their education. They’ll be able to make their own way in the world without your financial support. Thus, you can channel almost all of your long-term savings into retirement savings so that you’re not a burden to them in whatever they wind up doing in life.

How do you do that?

First of all, praise children on their hard work, not their natural gifts. Focus on when they improve their results, not on when they simply succeed because of their talents.

Second, give them room to explore independently. Don’t hover. Don’t be paranoid about kidnapping. Send them out to explore things on their own, then when they’re done, ask them about it. The more independent exploration they do, the more resourceful they’ll become.

Finally, put them into challenging situations. Don’t protect them from failure. One of the most valuable childhood lessons is learning how to fail. What do you do next? You pick yourself back up and try again. If you go through childhood without knowing how to do this, adulthood becomes much, much harder.

If you are constantly conscious of these three things, you’re going to naturally mold your children to be self-reliant and independent. Those traits will serve them very well in whatever they choose to do in life, and because of that, you don’t need to hand them their education.

They’ll be able to make it themselves.

I will love to hear – how you are planning to achieve both goals??


  1. Fully agree with the central theme of the article. Retirement is priority no 1.

    Shurbra recently wrote:
    “Then there is the education loan. Take a loan of Rs. 10,00,000 do an MBA and get a Rs. 12,00,000 job. Awesome return on investment.”

    If the kid is smart and hard-working there is not much of a problem. If the kid is not but still wants to enroll into a expensive degree because of peer pressure then that’s a noose on his neck.

    The last piece of the article hits the nail on the head. Parenting should be professional and not emotional. The whole idea is nurture independence and creativity.

    The general lack of these two attributes is the biggest problem in this country.

    • Hi Pattu,
      Education loans comes under “good loan” category because it creates the biggest asset for anyone, that is his career.

        • Sometimes education loan becomes unavoidable. My brother in law had to arrange education loan for his daughter who wanted to become an engineer. His daughter saved enough money when she started earning to do MBA as well as pay off her loan.

      • Dear Mr. Hemant

        I am going to investment for my children in LIC’s policies and I am going to invest in JEEVAN SARAL AND JEEVAN ANKUR.
        Please advice me about this policy, is it ok for future of my child.
        Please give urgent reply as I am going to this policy today.


  2. Hi Hemant,

    I dont think I completely agree with you on this topic. First of all we need to get out of the mentality that every child wants to become an Engineer or a manager. The most important thing for a parent is to identify the talent of his child and nurture him accordingly whether he wants to become a sportsman or an artist or a doctor or something else. Dont burden a child by putting pressure on him to become a manager or an engineer. Many people make that mistake. Secondly any kind of loan is a burden for any family member. Education loan is also such kind of loan which increases pressure on the child. It does not allow him to concentrate on his studies. The child thinks that its a burden and negative thoughts come into his mind. If I dont get a job then what will happen and all those stuff.

    I am not even sure about the fact that people would want to retire at 45-50. I think most of the people are still satisfied to work till 58-60. Early marriages are still very good and are better option than late marriages. If you marry at 25. You can expect your child to get graduated when you become 45-47. So you can save for your child during that period. So you still have 10-12 years to save for your retirement which is not a bad period of time when you retire at 58-60.

    It is always good if you manage to do both the saving(for child’s education or marriage and retirement) at the same time. But its not a big worry if you first think about your child and then think about your retirement.

    So the no.1 priority is of course child’s education and then retirement. Any parent will accept this fact. No parent wants to hear from their child that his parent has not done anything for him. And even a child will be proud of their parents that they have put their earnings for the studies which actually makes the relations more stronger between a parent and a child.

    Please remember that we are living in india where relations are given topmost priority. What you are talking is according to the western culture. But we indians are still more relation oriented rather than money oriented.

    • Hi Manoj,
      I appreciate your views & everyone is having his own thought process regarding emotional goal like child future planning. I also agree that don’t put pressure on kids – that’s why I shared tips regarding parenting 😉
      Regarding this point “So you still have 10-12 years to save for your retirement which is not a bad period of time when you retire at 58-60.” or expecting that kids will support us in future is a financial blunder.
      People should concentrate on things that they can control – can we control that we will be working after age of 50??
      Just to share as you mentioned regarding Indian Culture – 20% of my clients don’t want child marriage as their goal.

      • Hi Hemant,

        Why do you think we cannot control ourselves to work after the age of 50? Has it not happened before? Lets be honest. Majority percent of the people if we do the survey work till 58 and 60. You will find very few people who retire at 50. And most of the people who retire at 50 or take early retirement get a good amount from their companies or from the government if they are government servents. When a person reaches 50 he has all the experience in the world about his work. So he will still like to continue with his work. And most people keep themselves fit enough to work till 58-60. And there is no rocket science about this fact. We all know about this very well.

        Its really strange for me that you said “can we control ourselves to work after 50” because this is exactly what we people are doing since ages. If we cannot control this aspect in our life then we cannot control anything in our life. The only thing that is out of our control is accidental death. But for that we people have already learnt from you to take life insurance in the first place 🙂

        • Hi Manoj,
          Your point of view is also good but here I would like to say that ONE CAN GET LOAN FOR STUDIES BUT NOT FOR RETIREMENT.
          Also there is no guarantee that your kids will take care of you after retirement, keeping in mind the increasing inflation rate and sky high cost of living. By having a separate corpus for retirement you can make sure that you don’t depend on anyone and lead life with dignity at old age. Depending on someone for daily needs ans survival certainly lowers your self esteem.
          Hence its better to be professional rather than emotional!

          • Hi Anita,

            I guess, you did not read my comment properly. Nowhere I said that one should not save for their retirement. I said after saving for your child you still have good amount of time to save for your retirement. And if you do both the things at a time it is even better. Thats what I said. No one likes to be dependent on their children.

            • You are correct Manoj. I just meant to say that one should not use retirement corpus for children studies. Rather one should save for both the goals which are equally important.

            • Retirement has to be number one priority and one should start investing for retirement as soon as one gets his first salary to get the benefit of compounding. Saving and investment for kids can start later after one gets married and has kids. Planning for retirement ten years before retirement is not a great idea.

        • Hi Manoj,
          Don’t think I am a pessimistic but I am not talking about accidental death but may be mental death by the kind of hard work most of the people are doing in their jobs. Was the pressure same for our parents – every third client I meet is having hypertension & most of them are from IT industry. In the morning I was telling my mom – that I may be deaf in couple of years.(I am on phone for 150-200 mins per day & 400 mins on Saturday) Anyways I believe doctors will help us.
          Important point is even if you save 100% of your income (which is not possible) in last 10 years of career – it will be wiped out in maximum 15 years.

      • Count me in those 20%. I have no plans to save money for child marriage or his higher education.
        I completely agree with your last paragraph of nurturing the child to make him/her independent right from early age.

    • I am quite surprise by reading this “So you still have 10-12 years to save for your retirement which is not a bad period of time when you retire at 58-60.”

      The basics of financial planning is to start investing early but if you are planning to invest for retirement at the age of 45 then God bless you. It is simply not going to be enough.

      Other points raised on education loan, saving for child education etc vary from person to person. You might give relations the top most priority, I may not. You might want to save for child higher education, I may not. So, I don’t think there is anything right or wrong here.

  3. Hi Hemant,

    After reading this artical i looking to invest in HDFC SL CREST plan. Plz give me your expert advise on this. My advance Apology if this is not right place to ask this Q,but hope ur positive revert.

    • never buy CREST
      NAV creeps in these type of plans and why ulip, go for mf and take a good term cover

      • Yes vivek there is no relation this artical and HDFC CREST plan. Actually after reading this i start to think abt my retirement & child future plan. So today one HDFC executive visit our office and explain CREST plan they explain HDFC give guratee 15rps after 7years min, So i looking for invest in this but need expert advise..
        Again thanks for reply. Request you please explain little more on HDFC CREST if possible …

        • Sorry Suresh but I don’t know anything about this plan. I generally stay away from such products because more often than not these products make more money for the companies rather than customers.

          I’d suggest to plan for your own retirement by investing in equity MFs and debt instruments directly. I am no expert but that’s what I have learned since I started reading about financial planning.

        • Hi Suresh,
          Its a highest NAV guaranteed product but I am bit surprised as HDFC is still selling it – IRDA recently banned such products.

  4. Hi Hemant,

    Your views on child education planning trigger rethink on our traditional way of planning that is deeply rooted in our cultural values. It is quite interesting and even practical to think of education loan and passing on financial discipline/responsibility on the child as one of the options. I fully agree that parenting and the values we instill in our kids can make a difference to their mental make up. Financial education at an early age can help kids appreciate basis of our financial decisions e.g. utility of education loans. At the same time we need to wish for the best and prepare for the worst – hence child education will still remain one of the goals.

  5. manoj u said i m disagree with hemant sir but my dear friend here is wht i think abt ur comment:
    1.]First of all we need to get out of the mentality that every child wants to become an Engineer or a manager”=agreed bcoz every childs needs and capabilties r different.
    2.] The most important thing for a parent is to identify the talent of his child and nurture him accordingly whether he wants to become a sportsman or an artist or a doctor or something else=agreed bcoz it is the responsibilty of the parents to identify such things and wht talent he have might be the career for him.
    3.] Secondly any kind of loan is a burden for any family member. Education loan is also such kind of loan which increases pressure on the child. It does not allow him to concentrate on his studies. The child thinks that its a burden and negative thoughts come into his mind=”diagree” i want to ask u tht when u analyze and identify the talent in ur child then u may also got the idea that is he was strong enough to handle the loan or is he was weak hearted and if he is weak hearted then u can decide to fund for the child education its all abt planning by putting the steps in orderwise like i put ur comment.
    4.] I think most of the people are still satisfied to work till 58-60=again “disagree” have u done the research? i think it depends on the people n his financial situation if he has enough money for investment then he can call the early retirement on the other hand if he has some decent or small chunk of money in his hand then surely he can delay the retirement i hope u now agree with hemant sir if not then only way we can agree with u by the research if u have done it.hemant sir have the evidence of clients thts why i agree with him.
    5.] If you marry at 25. You can expect your child to get graduated when you become 45-47. So you can save for your child during that period.=”totally disagreed”though ur calculation r right if “YoU” married at the age of 25 then ur child get graduated when u become 45-47 but manoj i dont think that everybody will came under ur “you” again it depends on people wht i know youngsters still prefer not still they have decided to get marry only after settling their career hey now dont ask me for a evidence i m young so hope u dont require it 🙂

    • Hi Manish,

      Good to know your views. But your comments are like “easier said than done”. You are only hoping for your child to be strong on his own rather than helping him to become strong. That means you only have Plan A. What about Plan B? Plan B is important in case your child does not get a job for a while due to some problems like recession or something else. Just imagine the kind of pressure the child will go through at that stage if he takes the education loan. Thats where Parents play an important role by investing for their child’s future.

      Regarding the retirement. as I said there is no rocket science about the majority of the people who retire at 58-60 or at 50. Just be honest to yourself at least Manish that most of the people retire at 58-60 and even Hemant knows that. As far as research on such topic is concerned I think it will be a waste of time..just ask any of your neighbor at what age he wants to retire..You will get the answer.

      And one more thing Manish, dont be a YES man in your life for everything. Just because Hemant said agree with him. This is not the right way to lead forward. Try and do your own analysis and then we will talk more.

      I am a huge fan of Hemant’s articles and I agree with most of his articles and have been commenting on his topics since last 2 years but if I dont agree with something then I express my opinion. Difference of opinion is always good to have as it diversifies the knowledge amongst the people.

      • Hi Manoj,
        I believe I have not said these goals are either or but I was just talking about their priority.

        • Yes Hemant..true..its about priority. But lets make it simple..which should be the main priority?which thing in our life comes early. Of course child education comes early in our life ahead of retirement. I think you are right when you said its not possible to save for our retirement in 10-12 years. Maybe I should have said around 16-18 or may be till 20 for retirement. Even thats possible if we save for our child for around 12 years as child’s education will require less amount of money as compared to retirement.

      • My view is.. Get good education like Masters Degree so that in case of recession and worst job market also you will be in safer side[teaching jobs]. Then get marry early like in the age of 25. Have the kids early. So at the age of 45 or 50 you will be free[children education]. You can retire whenever you want from 45 itself. Quit the IT job and do some private consulting job or teaching job for some time for timepass and in the meantime do whatever you want like gardening, birdwatching, travelling etc.. do not wait for 60 to retire. By that time you will lose all your energy.

    • Just want to make one unrelated comment, here everyone is reffering to their child as he, we better should right he/she without any gender bias


  6. Dear manoj I appreciate ur views but wanted to tell u tht I have never written these lines “tht I am not there for my child to help him and leave him alone to be strong on his own”.i am agree with u wht if if there is a recession in the economy n how ur child is going to pay back the loan amt but imagine the case of middle class healthy people expected to live long who dont have any kind of social security but have some small surplus left for investment.if he invest this money for the child planning n achieve the corpus and as u said he has 10yrs left for retirement with such small tenure by investing the low amt how much corpus he ll get n will this corpus will be enough to sustain the same lifestyle n will the corpus will be enough so tht he can never outlived it.regarding the point of honestly I want to remind u tht the discussion is abt wht if people want to retire early not bt majority of people retire at the age of 60.coming to ur point of yes man yes I am yes man but I get agreed when the article hoof my neck n force me to say yes n if it not then I ll clear the doubt from hemant sir.

  7. wht i am trying to say if the person have the surplus which will be sufficient for his both goals then itz ok but if he dont have that much surplus then u dont have any option other than opting for education loan.

  8. every goal in life has its own importance.
    Its never to early or late… Start investing in a systematic manner in small amounts. There is nothing wrong in edu loan.. It brings the sense of resposibility in the child. Incase the student fails to get a job due to some factors then the parent shud repay the loan from the planned corpus. Parent shud always plan for child’s edu but shud always opt for edu loan.. If the studentgets a job then he will repay the loan and ur edu corpus wud add to ur retirement corpus.

  9. In my view retirement planning should take priority.

    If I am not happy I cannot keep people around me happy. Remember what airlines say about oxygen masks, put it on your mouth first before putting on the person siting next to you.

    So, if my future is not secure how can I secure someone’s else future. But yes I can always prepare my child to have a positive mindset and make him self-reliant and independent.

  10. Hello Hemant,
    Nice article. My plans are somewhat matching with your thoughts. Can you suggest some investment/action to take care of scenarios mentioned in your example table?

  11. Hey Hemant,
    Great article. I completely agree with it.
    Specially the last part is so good and I am surprised to see such good tips on parenting from a financial planner 🙂
    I am pleased to read this one as I am a new mother and I strongly believe that we must help our child to grow up wise.
    There is a saying ” Poot Kapoot to kyun dhan sanchay, poot sapoot to kyun dhan sanchay”. I agree to this saying but this doesn’t mean that I am not going to save at all for my son. Yes like any other mom I am concerned but I am not worried to save for him. I am sure if given guidance he will find ways for himself.

  12. Dear sagar in order to take care of scenario 1 (I.e) child education planning first u need to identify the present education cost then by considering the inflation calculate how much this cost will be after 10 or 15 yrs whatever the tenure is. the amt which u get is the corpus which u need for ur child education. based on this corpus match ur investment products with ur goal and risk appetide, create ur portfolio diversified it and monitor ur portfolio annually in the same way u can do the marriage n retirement planning n now the plan b which is wht if u r not there who will take ur child education expenses for this u need to take the adequate life cover asap.

    • Hello Manish,
      Thanks for your response. I agree and understand your views,but i was interested in suggestion for options like LIC money back policy,PPF,SIP,etc with details, which will take care of child education and retirement plan.

  13. Sorry the amt which u get is the amt which need annually or monthly for child education calculate the corpus n then make the investment based on ur risk appetite n time horizon.

  14. dear sagar If u r a first time investor then I suggest u read some articles like setting smart goals,best mutual fund,core and sattelite portfolio u can find all these in this blog.regarding the lic money back policy then I dont think to opt for it as most endowment and money back policy dont even beat the inflation.after reading the above post u can invest through sip in balance mutual fund ex-hdfc balance fund and then u can create the portfolio based on the core and satellite approch.ppf should also be the part of the portfolio since it is the best tax exempt debt product.remember if ur investment tenure is long then only u should do the sip in equity m.f as the market is very volatile for short term.

    • Manish, appreciate if you could hit the “reply” button while replying to any comment. Thanks.

  15. Very good article, I have forwd to my brother who is going through the 12th result of her daughter,

    Time are changeing one has to understand even if your kids wants to help u, they want be able to, as decent earning age is increasing, (with MBA -at 25 ) every time adding some or ther other qualification is required, and life style related diseases r increasing, and need of the profession related life style is the statement of the day, just think a 2 single kid, coming 2gahter as husband and wife will have to take care of 4 parents and their own kid/s ? Tax, lifestyle health problem etc list is never ending. Right time to take a notice of our a very uniq problem, u pay ur taxs, but no social security from govt. no health related facility, no old age home or any sp. facility to the tax payer. Your time and money has to be saved wisely that is what time demands.

    • We also have to understand – if we want our children to be really happy in their life then we should do your retirement planning properly. Rather than expecting them to take care of us.

  16. Hemant

    Please let us know what are the best retirement options available in the market.
    It shd be Reliable, Medium risk, verygood returns.

  17. I am 29 years old & I have 5 monts old baby. I want to make my daughter independent by ensuring a successful career for her. In order to provide for this, i am going to take the child policy “Max Life Shiksha Plus II” for a term of 20 years. Please advice me about this policy. Is it OK/Not for future of my child. If not OK suggest me the good one.

  18. Dear Hemant,
    If I have to build a corpus of 5 crores for my retirement 25 years from now what should be the best plan to do it. I am 33 years old now, annual income 6 lakhs. My monthly expense stands at 20,000rs. kindly suggest some investment options for this.

    • Dear Juzar,

      For reaching long term financial goals you have to consider inflation and taxation s the key factors in your investment. Also, all your investment should not go to one asset class but diversified. Hence, asset allocation is the right approach and long term goals like retirement need asset classes which can beat inflation and help you grow your money at reasonable rate. Historically equities have provided such returns.
      Consider taking exposure through Equity Mutual Funds through Systematic Investment plans. Your EPF contribution will play a good role in meeting some of you retirement corpus requirement.You can analyze the savings required to invest in equity after knowing how much you will accumulate through EPF.

  19. Hi.. Im 61 yrs old retired govt staff.. Im earning monthly pension of 15k per month and all my expenses are taken care by childrens(so all my monthly pension is currently saving). Please let me know these pension money can be invested in any insurance plan that my money would help my childrens on my absence. At this age am i eligible for applying pension plans like prulife icare where max age limit is 75. will that be really help to my childrens. will there be any difficulty in recovering the money in my absence.. Please advise good returns investment plan…..

    • Dear Masha,

      Investing in insurance plan might not be a viable option due to the long term commitment it requires and the lower returns it produces. You can consider investing this surplus through Systematic Investment Plan in mutual funds which have various schemes to select from based on your risk tolerance and time horizon you want to invest for.

  20. I am working in a PSU. I want to plan for my daughters future needs (who is 3 years old now). I have still 15 years service left. I am putting Rs. 10000 per month in VPF and will be starting PPF (Rs. 100000 p.a.) for 15 years in her name.
    Pl advice so that i can plan for investment in such a way that
    a) I save enough for her Education & Marriage.(approx. 50 lakhs)
    b) I save for my retired life with wife.

  21. Hemant Ji,

    I have additional money 50K to invest for my 18 month kid future can i invest lumsum in HDFC prudence fund. for next 20 yrs . will this create a money for my child education.


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