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Retirement vs child’s future: What should you prioritise?

Retirement is important. And so is your child’s future. Here is how you can optimally take care of both goals.

December 18, 2018 / 12:39 PM IST
(Representative Image)

(Representative Image)

Dev Ashish
Moneycontrol Contributor

Many young parents ask themselves this question:

Should I delay saving for my retirement as I need to first save for my child’s future (education & marriage)?

And this urge to prioritise saving for children gets a further boost due to the timelines of both goals.

Assuming the child is born when you are 28, s/he will need money for higher education when they turn 17-18 and you turn 45-46. The retirement is generally around the age of 58-60.


So the goal of children’s education comes several years before retirement. For many, this is a sure shot reason to give it a higher priority than their retirement.

To be fair, this argument is reasonable.

But there is another fact that should be made note of - your children can get loans for education, but you will not get any loans for retirement.

No matter what argument you offer, the fact remains that saving for retirement is extremely critical as it is bound to happen and you yourself have to pay for it.

If you don't pay for it, you will eventually become a financial burden on your children.

On the other hand, even if you give retirement the priority it deserves, you may still want to pay for your children’s education.

So how to do you prioritise one over the other?

Retirement is important. And so is your child's future.

If you really wish to take care of both optimally, then you need to begin saving for them early.

While the argument of ‘begin-saving-early’ may sound boring and repetitive, it is safe to say that there is no way around it. The sooner you start, the lesser amount you need to invest.

Suppose you want to save Rs 50 lakh for your 4-year old son’s higher education when he turns 17. For that, you need to start saving Rs 15-16,000 per month (at 10 percent expected annual returns). But if you start late, let’s say when your son turns 10, then you obviously have less time left to reach the same target, i.e. now you have just 7 years to reach Rs 50 lakh. And for that, you need Rs 39-40,000 per month.

Same is the case with savings for retirement. The earlier you start, the lesser amount you need to invest every month.

Delaying means you will have to shell out more for both. Possible (with higher income later) but why go down that route if you can plan well and take control of both goals from the beginning itself.

I know that you as a parent don’t want the lack of funds to hinder your child’s educational aspirations. But I repeat that you should be a little practical and give importance to your retirement also.

If you are confused, just find out:

  • How much is your Monthly Investible Surplus? Call it MIS.

  • Then find out how much you need to save for your Child’s Education every month. Call it CE.

  • Also find out how much you need monthly for your Retirement S Call it RS.

Note: Talk to an investment advisor if you don’t know how to correctly assess these numbers

If the total savings requirement (CE + RS) is less than your monthly surplus (MIS), then you are lucky and have things in control. You can save for both easily.

But if the total savings requirement (CE + RS) is more than your monthly surplus (MIS), then you need to decide which one to prioritise.

There is no perfect formula to do it.

But if you have a decent on-going PF contribution (savings) program with your employer, consider prioritising (for few years) child’s higher education.

And if that’s not the case, please prioritise your retirement savings. That means you should focus first on contributing adequately to your retirement savings and then save what’s left for your child’s education.

Remember, you are doing what best you can do. You are saving for your retirement so that you don’t become a burden on your children. You are also saving some money (to best of your ability) for their higher education. It may not be enough but is still going to be a reasonable contribution from your end. The funding gap (if any) can always be taken care of via education loans, scholarships, etc.

I know that most parents will still prioritise children’s education. And to be fair, this cannot be questioned.

But at the end of the day, it’s not a choice between retirement or children’s education. It’s more about retirement and children’s education.
Moneycontrol Contributor
first published: Dec 18, 2018 12:37 pm
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