Dreaming of sending your child for foreign education? But have you thought through the finances? A growing number of Indian parents are sending their children abroad for higher studies, but the latest HSBC Quality of Life Report 2024 suggests that this could come at the cost of their own financial future.
HSBC surveyed over 11,000 affluent individuals in 11 markets globally and found that increasing living costs, expressed by 68% of respondents, and inflation affecting savings, noted by 61%, could disrupt life plans, particularly when it comes to the anticipated expenses of overseas education.
“Preparing for a child’s international education can be daunting for families, involving considerable financial commitment and decision-making. But with the right support, parents can focus on their child’s education without putting their financial stability at risk,” said Sandeep Batra, Head of Wealth and Personal Banking, India, HSBC.
Key takeaways
Parents funding their children’s overseas education
The report reveals that 90% of affluent parents globally are taking full responsibility for funding their children’s international education. The majority of them are either using dedicated education savings plans or dipping into their general savings.
Education savings plans:
Total: 53%
Asia: 55%
Non-Asia: 46%
General savings:
Total: 51%
Asia: 53%
Non-Asia: 46%
Some parents are also considering other options to meet the high costs. Around 22% are thinking of taking out loans, and 20% would sell assets to cover expenses. Meanwhile, 28% of parents expect their children to take out student loans to share the burden.
Is scholarship the solution?
A large portion of parents are hopeful that scholarships and government grants will ease the financial load. The survey shows that 44% of parents globally are expecting their children to receive scholarships, while 22% are banking on government grants.
In Asia, parents seem slightly more inclined to seek scholarships and financial aid compared to their counterparts in non-Asian regions.
The cost of overseas education and its impact on retirement savings
Sending a child abroad for higher education can be a heavy financial burden, with parents spending an average of $63,664 annually. The report indicates that this expenditure could potentially impact retirement savings significantly, especially in markets like India and Indonesia, where parents might have to part with up to 66% of their retirement funds to finance a child’s education.
The average annual costs across countries include:
China: $71,437 (approximately Rs 60 lakh
India: $62,364 (approximately Rs 52.3 lakh)
Singapore: $72,395 (approximately Rs 60.8 lakh)
United States: $65,950 (approximately Rs 55.3 lakh)
For Indian parents, sending a child abroad for a three-year degree could deplete 48% of their retirement savings, while a four-year degree may consume up to 64%. This highlights the financial strain on families and the delicate balance they must maintain between their child’s education and their own retirement plans.
What challenges do parents face when sending their children abroad?
Financing is just one piece of the puzzle. The report highlights that affluent parents encounter several hurdles during the process of sending their child abroad for studies. These include securing funds, finding the right course, and ensuring their child meets university admission requirements.
Top challenges faced by parents include:
Securing funds before studies begin: 44%
Choosing the right course and university: 41%
Preparing their child for university admissions: 41%
Arranging visas, accommodation, and travel: 36%
For Indian parents, these challenges are compounded by the rising costs and the complex process of planning for overseas education.
Indian parents are looking to alternative destinations in Asia
While traditional destinations like the US, UK, and Australia remain popular, there is a noticeable shift among Indian parents towards other Asian countries for their children’s higher education. The report reveals that Australia and Singapore rank as the fourth and fifth most popular study destinations for Indian students.
Indian parents, along with those from Malaysia, China, and Indonesia, are increasingly sending their children to study within the region, as these destinations offer more affordable education and similar career opportunities.
“As Asian economies continue to grow, we are seeing more families invest in overseas education, often within the region. This shift is driven by lower costs of living, emerging job markets, and greater opportunities for students,” said Kai Zhang, Head of South and Southeast Asia, Wealth and Personal Banking, HSBC.
He added, “The growing presence of multinational companies and innovative start-ups in the region is making Southeast Asia an attractive destination for both expatriates and students.”
Other financial concerns among affluent Indians
The Quality of Life study also highlights other financial concerns that weigh heavily on affluent individuals globally, particularly the rising cost of healthcare and inflation. Indian respondents specifically pointed out the following financial priorities:
Supporting family members financially: 45%
Gaining wealth for financial security: 41%
Investing in properties: 40%
Saving for their children’s education: 40%
Planning for retirement: 38%
Additionally, the report delves into key areas such as healthcare protection, with 46% of Indian respondents relying on private insurance, while 39% are covered by both private and public insurance.
When it comes to wealth accumulation, 71% of affluent Indians believe they are financially fit, with 62% seeing an increase in their investable assets. Interestingly, 58% of affluent Indians plan to continue working post-retirement, and 86% are already engaging in legacy planning, indicating a proactive approach to wealth management and inheritance.
Preparing for your child’s overseas education
If you’re planning to send your child abroad for studies, creating a detailed budget is essential, suggest HSBC. Factor in not only tuition fees but also living costs, accommodation, and travel expenses. This will give you a clearer picture of the overall costs and help you plan your savings accordingly.
It’s also wise to start early, ideally as much as 10 years before enrolment, to ensure you have enough time to save and prepare. Financial advisors can provide valuable insights to help you navigate the complexities of funding international education.
Teach your child financial responsibility
Teaching your child the basics of financial responsibility is crucial before they head abroad. Setting up a bank account and providing them with a debit or credit card can help them manage their own finances and make smarter spending decisions. It also offers peace of mind for parents, as you can easily transfer allowances or respond to emergency situations quickly.
Keep an eye on scams
With financial independence comes responsibility, and it’s important to make sure your child is aware of potential scams. Cases of credit card fraud and identity theft are on the rise, and students may be particularly vulnerable. Educate them about the risks of sharing personal information like OTPs, bank account pins, and passwords to help them stay safe.