Funding my daughter’s marriage

Now that my daughter Rinki is going to be 23 soon, it is time to start thinking that she will get married in a few years. Of course, given the fact that she is in the second year of her BM program at XLRI and will probably work a few years before getting married, I think we are still looking at another 4 years or so, maybe 5. However, given the kind of expenses it entails one must plan for it in advance.

As my regular readers will know well I do not have separate portfolios assigned to specific financial goals. I simply have 3 portfolios of Debt, Stocks and MF where I invest in and take out money from these as and when needed. So far this has really not been needed as I have always had enough to spend from my active income. This is true even in my current state of Financial independence but may not remain so at the point of time my daughter gets married. There is thus a need to plan for this.

In general, my idea always had been that I will pay for my children’s graduation, no matter how much it cost, and also a reasonable amount in their marriage. Post graduation was something I wanted my children to fund themselves, normally through a bank loan or even taking some money as a loan from me. I did not see much point in paying high interest rates to the banks. This will burden the child with high EMI and restrict his or her freedom to make the right choices.

Based on all of these, when Rinki got admitted to XLRI we took a 12 lacs loan even though the course fees were in the range of 22 lacs. The idea was that I will pay much of the first year fees and she would get it paid by the bank in the second year. Total costs for the first year was 10.5 lacs and we took only 50000 from the bank. This was needed to keep the loan valid. In the second year the fees to be paid are as follows – 4.71 lacs in June, 2.5 lacs in August and 2.5 lacs in November. Right now we have paid the first 4.71 lacs through our own resources – Rinki had some internship money from her Summer stint in GE, one of the FMP I had earlier done for her reached maturity and a FD I had done some years back matured now. Under ordinary circumstances I may have needed the money for my expenses but as my active income is going well in 2017 the flexibility is quite a lot more.

With the above backdrop and the assumption that Rinki is likely to get a job which will pay her at least the median salary in XLRI, I have worked out the following plan with her

  • We will try to restrict the bank loan to 4.5 lacs or so.
  • In the first year of her job, she will pay back the loan in full. Along with the interest this may come to 40000 per month.
  • Assuming that she gets a take home salary of 1.2 lacs per month and needs to spend about 40000 on regular expenses, she will still have 40000 left as surplus in year 1.
  • From year 2 the surplus is obviously a lot more.

What about the money I have paid for her PG education? It will amount to about 14 lacs and I do not want her to pay it back to me. I have asked her to invest it in a portfolio of 4-5 MF over the next 3 years @ 40000 per month. Over this period the amount of the corpus will be 17.4 lacs and in 4 years it will be about 20 lacs. This is the amount I plan to utilise for her marriage. Yes, the costs may be more and if so, I will fund the gap.

What if she decides not to get married at all or get married later. Well, in the first case the money is her’s to use in any manner she wants to. In the second case, the money will remain invested and we will be using it as and when she gets married.

For my son the issues will be simpler as the marriage expenses are likely to be lower. Also, like I did for myself, I am hoping he will be able to foot the bill to some extent, if not for all of it like I did. That is way down the future though, at least 8 years if not more.

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Children’s marriage – a financial goal?

In one of my earlier posts I had written as to why I do not consider the marriage of my children to be a life goal for me. I believe, they have been brought up in a way such that they can select their own partner for life when the time comes. Yes, as parents we will be supportive of it and may also interact with the families of their would be spouses according to the prevalent social norms but, neither my wife nor me, think that we have to initiate the process of finding a bride or groom for our children.

Some of the feedback I have received to the post is a pointer to what is wrong with our societal mindset till today. Sample some of this :-

  • If the girl is not having a good education, she may want to get married at the age of 22 or so. People saying this need to realise that if a girl is being brought up from her early childhood to simply get married after a perfunctory graduation, she is hardly going to have the motivation to do anything else in life. In this day and age, we as parents need to give wings to our girls, not shackle them with chains so early in life.
  • If a son is unable to find a suitable life partner on his own, it is the responsibility of his parents to do that for him. Well, I have no real issues with the parents taking an initiative in this matter as long as it is just for facilitation. Unfortunately, in most cases it turns out to be deterministic and two people, who have little going for themselves in terms of compatibility, get married to each other largely because their families are fine with it. The consequences, often, are quite disastrous.
  • Others said that while it was good in principle for the children to foot the bill of the marriage, how will they do it at such an early age etc. My thoughts on this are very simple – fund the marriages of your children to your heart’s content, as long as you can afford it without affecting what else you desire in life. If you are having a grand wedding but do not have enough money for your retirement years, then there is a lot wrong in how you are thinking through your decisions.

Having gone through those above, let us examine why I think it is a good idea to fund the marriages of children through them. We live in a very different world and social milieu today as compared to even 10-20 years back. At these times the parents were taking complete responsibility of their children till they got married and this included higher education as well as marriage. The underlying assumption was that the children, in turn, would take care of their parents, at least financially, when the time arrived. Today we dare not depend on such hopes as parents and therefore need to look at things with a lot more objectivity and logic rather than just filial emotion. The other thing that has changed is the cost of both higher education as well as marriage. Even 15 years back a B school degree used to cost about 3 lacs, today the same figure is close to 25 lacs. A degree in Engineering with associated expenses has gone up from 2 lacs to 16 lacs plus in the same period. So if you are sponsoring just the first graduation degree of your child you are probably paying more than what our parents paid for all these together.

Coming to the issue as to whether the children can fund their own marriages at such a young age. Well, I think that no son should marry till he is about 28 and this can probably be 25 or so for a girl. This will give then 4-6 years of working life which can be quite adequate to save up for the wedding. Of course, if they are paying a high student loan then the idea should be to pay it off first. Also, if you have the bandwidth as a parent to sponsor either a PG education OR the marriage, I will say choose the first.

I will write other posts on typical wedding costs and how these could possibly be funded by the children, but for now, let us look at a situation where you want to foot the bill. As long as you are being reasonable about the spending according to your own financial bandwidth there is nothing wrong with it. Unfortunately, Indian weddings today have become a spectacle of unmitigated desire to show off money, promoted by mindless and rather vulgar consumerism. I have seen many parents go completely out of the way, in order to show up their relatives and neighbours. At the end of the day, such reckless expenditure cravings often have rather sad endings.

My own experience here will not be out of order. I had worked for about 5 years and a bit when I got married to Lipi. Though I lived a good life as a bachelor in Delhi, I did manage to save a fair bit in those years. In 1993 the world in India was a different place and weddings were expensive affairs but not exorbitantly so yet. In order to comply with my mother’s wishes about how the wedding should be done, I ended up spending most of my accumulated savings and was quite happy to do so. I remember being so broke that Lipi had to sponsor the train tickets for our honeymoon in Panchmarhi. I never thought anything about spending for my wedding as my father had spent a lot of money for my education and those of my sisters. Yes, they were less expensive then but his salary as an Engineer in SAIL was also not a lavish one. 

So coming back to the core issue, is the marriage of your children a financial goal for you? Yes, if you want it to be but look upon it as the least priority item, after your own retirement and children’s education. If you have enough money, do what you want with it. However, if your children are unable or unwilling to take responsibility for their lives when they are 26-28 years of age there is a basic issue. Also, if you have brought up your daughter letting her think she just has to complete her graduation somehow and marriage is her only real goal in life, there really is a huge problem.

Coming to my children, I do hope they will choose their own partners when they want to get married. I will fund their marriage to the extent I deem logical but if they want to indulge in crass consumerism, they can foot the bill on their own. By then, they should be doing rather well in life and will be able to afford it quite well anyway.