Is There a Sane Limit for Indian Parents in Using Retirement Savings to Cover the Cost of Studying Abroad for Their Child?
The cost of studying abroad has put many Indian families in a financial bind as they increasingly tap into their retirement savings to help their children get that elusive dream of overseas education. About 62% of Indian retirement savings goes into financing a child’s foreign education, says Aviral Bhatnagar, an IIM Ahmedabad alumnus who founded the AJVC Investment Firm. This sums up the side of the contentious debate about whether it is sensible enough for parents to imperil their financial security while searching for better educational opportunities for their children.
Why Indian Parents Are Prioritising Foreign Education
Education from abroad has been one of the most sought-after measures for Indian families in recent times. Highly regarded foreign degrees from institutions like those in the US, UK, Canada, or from other western nations are considered a step forward towards better job prospects, more lucrative packages, and acquaintance with the outside world. For many parents, an education for their child from such an institution is worth any amount of money that might be withdrawn from their retirement savings.
According to Bhatnagar, Indian families who represent the top 0.5% among Indians are spending as much as ₹50 lakh to send abroad their children who, according to her, have a brighter future, even globally. He underlines the fact that education has now become the biggest worry in the lives of most Indian parents rather than buying a house. With soaring tuition fees, however, education abroad can no longer be afforded by most families.
Is Foreign Education Worth the Financial Risk?
The debate on whether Indian parents should spend such big amounts on their children’s foreign education has thrown up mixed reactions. The party against spending such huge sums feels that the return on investment, or ROI, for a foreign degree has gone down with these changing times, more specifically in the volatile world of jobs and uncertainty regarding work visas.
Other respondents believe that the cultural appeal of schooling abroad and wishing to spend time in western nations is what sends families overspending. That is why “spending more than half of one’s net worth has become the norm.” As one user noted, “Indians are quite hyped with getting a lavish degree,” the logic of which may explain the overall trend when students and parents find studying abroad an investment in securing a better lifestyle as well as education.
Close Alternatives at Home: Do You Really Need to Study Abroad?
Perhaps the same quality education might be available to Indian students back home without weighing in with such a price tag. The cost of studying at a private Indian institution was as hefty as at foreign universities, offered a LinkedIn commenter.
Therefore, the speaker asserted that most students who opt to travel abroad do not get admitted into their favourite courses back in India. This is also a possibility that Indian students spend on overseas education merely for the prestige and luxury involved in it.
The Effect on Pension and Long-Term Planning
Such financial outlays abroad have a greater significance than expenditure on present-day consumption. Most Indian parents would be vulnerable to undue pecuniary squeeze in their old age were they to spend retirement savings to pay for the education of their child abroad. That will only tend to put off their retirement or cause them to spend much less on consumption at retirement or even have to be kept by other relatives while they are old.
Such an important issue is brought forward by Bhatnagar in this post on LinkedIn: Indian parents are now beginning to put their children’s education over their financial security.
Conclusion: A Balancing Act Between Education and Financial Security
Such debate over a question so highly relevant in the modern Indian scheme of parenting—should parents splurge nearly all their retirement money to set up and nurture a foreign education seat for their children—will continue for long. Clearly, the door opener that is a degree from a foreign university does not come free.
At the very bottom line, funding foreign education for a child must be balanced against what constitutes long-term financial returns for retirement. Most importantly, finding the right balance between securing a good education and safeguarding retirement savings is crucial to ensuring both the child’s success and the parents’ financial security.
