I have been engaged in an overall financial audit for myself since the last month. While auditing my investment portfolio is a major part of it, one of the significant expenditure areas which I am trying to get a fix on is my son’s Graduation expenses. I wanted to share some of the data as many readers may be benefited by a real life example.
To give some background, for the people who are unaware, my son Ranajoy is presently doing a 5 year dual degree course, comprising Msc Maths and BE Computer Science from BITS Goa. He is presently in the second year, so we have paid his fees till the 4th semester. As the increase of fees in BITS is quite regular and predictable, it is possible o estimate the total cost of the course and also what is the amount we will still need to pay over the next 3 years. Note that I am only talking about expenses paid to BITS directly here.
- Year 1 expenses were in the range of 2.4 lacs
- Year 2 expenses were in the range of 2.7 lacs
- Admission expenses and PS1 expenses were in the range of 80,000.
- Year 3 expenses are likely to be in the range of 3 lacs
- Year 4 expenses are likely to be in the range of 3.4 lacs
- Year 5 expenses are likely to be in the range of 3.8 lacs
Total projected expenses for the course are therefore in the range of 16.1 lacs. If I add about 1 lac a year for his other expenses, inclusive of travel etc then the total expenditure comes to about 21 lacs. Of this I have only paid about 7 lacs so far, therefore a long way to go yet.
How do I plan to manage the payments now and in the future? I have taken a simple approach here – kept some FD in his account for the next 2 semesters and will keep doing this as time progresses. Essentially, I do not look upon this money as part of my cash flow, it is like a separate account maintained for my son. Even for his own expenses, I transfer some money periodically, as and when the account dips to below 10,000.
Apart from the convenience and peace of mind that I get from it, my son is also becoming more responsible about money by handling his own account. He knows how much money comes in, how he is spending it and how much fees are being paid to BITS.
With BITS increasing fees by 12 % and more every year a 4 year course will be 40 lacs in 6 years, 80 lacs in 12 years and 1.6 crores in 18 years. This may sound rather fantastic but is quite likely to happen so it is better to be prepared.
I for one am glad that my daughter has finished her college now and my son is well into it!!