The Cost of Raising a Child| North Loop Official Blog
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27 Nov 2020

The Cost of Raising a Child

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How much does it cost to raise a child -

As new parents or parents-to-be who are planning a family in the future, it is crucial to know the cost of raising a child. It can help you plan, not just emotionally but also financially. We understand that no one can ever put a price tag on the blessing of having a child, but it is always wise to be aware of the various financial aspects related to it so that you can ensure that you have everything covered.

As per rough estimates and statistical data available, it can cost between Rs.1.5 crore and Rs.2 crore to raise a child. The amount includes all the expenses involved during prenatal care, delivery charges, education, healthcare and medicine, higher education, marriage etc.

Also, if you add inflation into the picture, the cost of college education and career planning can get even higher. Moreover, a little bit of over-indulgence on children is also inevitable.

The cost of education is also soaring, added further with the recently increased requirement of gadgets like laptop, smartphones etc. Therefore, it is prudent to know the average cost of child care through different life stages.

Expenses at different life stages -

Until pre-school, that is in the first year after a child is born, the average cost of child care is around Rs. 1 lakh. That includes expenditure on medicines, vaccinations and baby-care products as most of these facilities are quite expensive, especially in urban and semi-urban locations.

After completing two years of age, the bigger expenses come into the scene, such as schooling in the form of playgroups. The outflow for that can be Rs.50000 to Rs.1 lakh and varies depending on the facilities provided to the child. It also depends on the kind of playschool chosen.

Not to forget the extra expenses on continuous new toys and clothes for a child in the early years as they continue to outgrow the old ones.

The major chunk of expenses involved in the cost of raising a child is on education. According to data, most parents spend at least half of their yearly income on their child’s education and extra co-curricular activities. It is natural for you to want the best education for your child and to meet the fees of good schools, a lot of money gets required.

A decent school charges an annual fee of Rs.50000 to Rs.2 lakh. That means, 12 years of school education can lead to an outflow of around Rs.11 lakh to Rs.43 lakh assuming 10% annual education inflation. Moreover, this cost excludes the expenses incurred for tuition fees, co-curricular activities etc.

The largest monetary outflow that parents experience is at this stage. So what is the average cost of popular career options like engineering, medical etc.? If you want your child to pursue engineering, you may have to pay Rs.10 lakh today, and the same can cost you about Rs.40 lakh to Rs.50 lakh in the next 15 years. Similarly, for an MBBS degree, the costs can be around Rs.25 lakh today to above Rs. 1 crore in 15 years.

However, one way around this is to opt for education loans to fund higher studies. That can ensure your child gets the desired career with a significantly less financial burden on you. But it is also necessary to opt for loans with reasonable interest rates to cut down your expenses.

Entertainment costs have also risen significantly of late, especially in urban areas. If you are raising a child, you obviously cannot only focus on the bare minimums or necessities. For an all-round mental, emotional, social and physical development, spending money on sports, entertainment, cultural events, hobbies etc. is also necessary. The amount that you may have to spend on these discretionary expenses can vary from child to child.

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Conclusion -

We assume that this article helped you get an idea of much does it cost to raise a child. So, given the above outflows, you can understand that it becomes imperative to opt for a sound financial plan.

That can help you segregate the different financial expenses at various stages of a child’s life and also help you in better managing them. Moreover, financial planning can prevent you from being unprepared for your retirement, buying adequate insurance or even creating an emergency corpus.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.