I vividly remember the experiences shared by a school teacher who addressed us at a MDRT (Million Dollar Round Table) conference nearly five years ago. His fifth grade class was a “live” version of Monopoly. Children were given “currency” at the start of the month which they used to rent out their seats in class. The closer it was to the teacher, the more expensive the seat (like prime land in a city). There wasn’t enough money to pay for the full month’s rent, after which you sat on the floor. You could earn more money by doing well in your tests, performing good deeds, behaving well, etc. His brightest kid had earned enough to buy a seat for himself in the first row, and a few months later, to buy another one which he rented out! The kids from this teacher’s class did not have to worry about managing money at a later age, as these money management lessons would last them a lifetime.
Plan well before your overseas course starts
Today, more and more children are travelling abroad for their studies. You need a fix on the tuition fees, accommodation and living expenses -- else the budget can skyrocket. Your child will be busy preparing for his final Board or University examinations, but his decision is already made, as application deadlines are already past. So, this is some homework for you, parent!
Get a realistic fix on all the fees payable
The tuition fees shared by the institution will be at previous year levels. Our assumption that inflation rates are lower in developed countries will go horribly wrong, as education expenses rise by 7-9% for most international institutions. A similar rise must be assumed for accommodation charges as well. While budgeting for accommodation (most universities will have on-campus options), take into account that your child may wish to reside in a self-contained unit and not a dormitory in the first year at least.
It may be useful to talk to experienced parents, preferably from the same University, to understand how to estimate living expenses. A recent traveller and someone whose lifestyle you relate to may obviously present a more realistic picture. Remember to take into account cost of the food plan, purchase of books, cell phone costs, gifts for friends, cost of movies, local and national transport costs; including those for going to the movies, and travelling to the airport and back when taking flights home – don’t forget the cost of the flights itself. It will be beneficial to encourage your child to work within a budget. I for one agreed for my son to come home this Easter only after he offered to share the air ticket cost: feel glad that he understands the value of money.
The most critical aspect of managing overall costs of overseas education will depend on foreign currency movement.
You will need to evaluate the benefit of transferring funds now at a rate which seems beneficial with the lower rate of interest that you will earn on money sitting in your son’s bank account abroad. For a start, read up on the past movements of the currency and the factors that affect its movement. Individuals too can take forward cover on the currency to avoid facing surprises; but I, for one, would rather use this opportunity to learn how the Indian Rupee moves against foreign currencies. What about you?
(The author, Lovaii Navlakhi, is the Managing Director and Chief Financial Planner of International Money Matters Pvt. Ltd. www.immpl.com)