In this blog post, Sarabdeep Singh provides insights on the amount needed to raise a child in India. He was formerly associated with Ebay as a Digital Head and has vast experience in bootstrapping startups. He is currently on a mission to solve the problem of personal finance and investment with his new bootstrapped startup, Bodhik.com.  

Raising a child is not just an emotional and physical investment for parents, but it’s a big financial obligation also. With the cost of education, health and food increasing raising a child is costlier than ever in India.

So how much does it cost a middle class Indian to raise a child, to understand let’s first understand the costs associated with raising your child? Here is a list of major cost heads for raising a child.

1. Education
2. Entertainment
3. Clothing
4. Food
5. Healthcare
6. Vacations
7. Other costs

Let’s review these costs one by one and look at how much will it cost in today’s time to raise a kid.

1. Education

Education expenses can be broken down into three broad areas –

• Preliminary education/school
• Coaching for professional programs like ( Engineering/Medical/CA)
• Expenses on graduation studies like ( Engineering/MBBS etc.)
• Other optional expenses can be Postgrad expenses

2.   Health Expenses

Health care expenses are rising very quickly in India, As per an Economic Times study in 2011 average cost of raising a child was 2.1 lacs. Since then, there has been a sustained inflation in health care costs that have more than doubled.  So average health care costs to raise a child will be in the range of 5 lacs.

3. Clothing, toys & Gadget expenses

A cursory trip to a kids store and you will realise that kids clothes and toys are the costliest things to buy. With amazing merchandise being available for kids and brands running specific marketing campaigns focused on kids clothing, toys and Gadgets can cost you up to 50k per year.

4.  Food expenses

Food and other related expenses including eating out can cost on an average Rs 6000-Rs 7000 per person. So this can be another 80k of expenses, per year. This is going to increase as food inflation increases so over 20 years or food might cost you about 15-20 lacs in today’s money.

5. Entertainment/Vacation expenses

This is flexible based on your needs but an average middle-class household going out for a movie every week and may be some play or a weekend trip can cost about Rs 4000 per person.  One domestic vacation per year can cost you about 30 k per person, so on an average yearly expense on

So, the total annual expense on Entertainment and vacation will be in the range of 80 k per year.

Here is the summary of the costs –

All these expenses do not assume inflation and are in today’s cost, but as you raise your child every year, there is going to be inflation which you would need to factor in for your budget.  So raising a child can cost you approximately 70 lacs today.

Here are few tips on how you can save and plan your investments to take care of your child’s requirements:

1. Start saving early:

Less than 10 % of parents start saving just when their kids are born while saving for kids this is the most important thing to do, if you start late you are going to have a very small runway, so start early

2. Create Financial goals in line with money required at different stages

While some expenses are regular but major education expenses come in chunks, so you need to plan it ahead create a financial goal for education and ensure you save and invest diligently to achieve the goal.

3. Do not buy structured child care plans which are promoted by all banks, they normally give poor returns.
4. For long term goals, invest in equity rather than creating fixed deposits.

Finally, raising a kid is a series of financial obligations, plan it well and if required consult with your financial advisor.