Step-By-Step Approach To Plan Your Child's Marriage Needs
“Cant keep calm I am the mother of the Bride”, says Mrs Gala. Shruti is the only child of Mr & Mrs Gala.
She is getting married to her childhood friend, Raj in December. And Shruti being the only child, her parents have big plans for her wedding.
Every parent wants to make the wedding of their child one of the most memorable occasions of his / her life.
Weddings are in fact considered to be synonyms with fun-filled, colourful and musical events.
But along with all of this, another important thing attached to weddings is "expenses".
And in order to fulfil these desires, it is imperative that you follow the right approach towards planning for your finances.
Having a practical approach to all wedding related expenditure is necessary and that will enable you and your family to live a stress free financial life.
Chapter 1: Steps To Plan For Your Child's Wedding
Step 1: Start Early
While planning for your child's needs, it always pays to start early. This is because if you start saving and invest early, it will give you a larger time horizon to meet the goal and even build a bigger corpus.
Remember the old adage, “Rome wasn’t built in a day.”
Therefore, to accomplish the dream of getting your child married begin saving and investing early —perhaps when he/she is a toddler.
Starting early has a variety of benefits:
✔ Permits you to take a relatively higher risk and invest in equity mutual funds and benefit from potentially higher returns in the long run
✔ Helps to benefit from the power of compounding; and
✔ Allows you to contribute smaller amounts regularly over longer periods
Now consider the case of Mrs Gupta.
Mrs Gupta has a daughter aged 2. She wants to create a marriage corpus that should be ready for her daughter in 22 years.
Currently, Mrs Gupta imagines that she would spend Rs 15 lakhs on her marriage if it were happening today.
So, let's ascertain how much she needs to save for her daughter's marriage every month to get her married after 22 years?
| Daughter's Age |
2 years |
| Cost of Marriage today |
Rs 15 lakhs |
| Time Left for Marriage |
22 years |
| Inflation Rate |
10% p.a. |
| Cost at time of marriage |
Rs 1.22 Crores |
| Amount Mrs Gupta needs to invest per month |
Rs 9,516 |
You see, considering inflation, the corpus Mrs Gupta would require for her daughter's marriage - after 22 years, will rise to Rs 1.22 crores.
And to achieve the same, she will be required to make investments worth Rs 9,516 every month, which can fetch a return of 12% per annum.
However, if Mrs Gupta delays this investment, and starts to invest for her daughter's marriage after 5 years from now, she would need to invest almost double i.e. Rs 18,464 per month.
Hence you see, the earlier you start investing, the less stressful it will be for you to achieve this goal.
Step 2: Rationally Estimate Wedding Expenses
Don't be carried away by societal pressures or affluent friends or neighbours. Remember, each one's personal finances are unique. There's also no need to ape others blindly, as each one's financial circumstances/situations are different.
Therefore, focus on YOUR budget as there are other vital financial goals to fulfil as well like your child's education and your own retirement, among a host of others.
While estimating the wedding expenses, take into account the present value i.e. the amount you would have spent today on your child's wedding on a rational basis. Extrapolate the future value considering inflation and the time horizon before the goal befalls.
Then work out the periodic monthly investments you need to save in mutual funds via Systematic Investment Plans or SIPs. Keep in mind that the earlier you start this exercise, the lesser you would have to set aside and invest per month to accomplish this financial goal.
Step 3: Follow An Asset Allocation That Best Suits You
It is important to build a portfolio on the basis of your asset allocation. An ideal asset allocation is decided on the basis of various factors such as your age, income, risk appetite, risk tolerance, nearness to goal and so on.
A well-defined asset allocation is capable of dealing with different market conditions and helps you reach your goals in a systematic manner.
Different asset classes have different attributes. Hence, a mix of all or some is important.
For instance, equity is a must for your long-term goals. But you may include gold as an asset class which can be a hedge against uncertain times.
As the goal nears, you may rebalance your investment portfolio gradually towards fixed income or debt as depicted by the table here…
Asset Allocation As Per Years to Goal
| Time Horizon |
Equity |
Debt |
Gold |
| More than 10 years |
90% |
0% |
10% |
| 8-10 years |
80% |
10% |
10% |
| 5-8 years |
70% |
20% |
10% |
| 3-5 years |
40% |
55% |
5% |
| 0-3 years |
10% |
85% |
5% |
This table is indicative and for illustration purpose only
(Source: PersonalFN)
A well-planned asset allocation helps to act as a shield to protect the portfolio value during uncertain economic conditions and market volatility.
Step 4: Invest Smartly To Build The Corpus
Mere savings won't be enough. Hence, you should invest in mutual funds via Systematic Investment Plan (SIP).
With SIP you inculcate the habit of regular savings. You systematically invest in funds over a period of time and eventually a corpus of huge amount is built.
Investing in equity mutual fund schemes may prove rewarding if time horizon for marriage is more than 5 years.
Step 5: Get Insured Optimally
As parents ensure that you are optimally insured for life. The demise of the breadwinner of the family causes a BIG setback to your dream of providing the best to your children. Therefore, as parents, ensure that you are adequately insured.
Use our Human Life Value Calculator to know the adequate insurance cover for you and your family.
Pure term life insurance plans may be considered to indemnify risk to life for the cost-to-benefit they offer.
Likewise, optimally insure for health, as not having an adequate medi-claim cover or not having one altogether, can potentially derail your financial goals if medical emergencies arise.
Step 6: Avoid Creating Any Debt
Agreed, weddings are once in a life time occasions and you want all arrangements to be perfect.
But PersonalFN is of the view that, if you take a sizeable amount of debt for that one event of life which is going to take you years to repay, then you will be severely hurting your financial health. And even if you have to take some loan, make sure that you take only that much which is extremely necessary.
You see, it is imperative for us to realise that although marriage is the happiest moments of our lives, the cost associated with it can create it a sour memory if not dealt with care.
Many parents are burdened under the societal pressure and expectations and compelled to go beyond their means.
And in this bargain, they drain out most of their financial resources or worse even take loans. You need to understand that if you land up knee deep in debt by one of your children's wedding, then you are not only bidding a goodbye to most of your financial goals but also depriving your other child of the basic needs of life.
Some things which a necessity to few are luxury to others. It is for you to decide what are your "need to have" things and what things can be "easily avoided". Once you have determined this, cutting down on extravagant costs will not be a difficult task.
Adopt a practical approach to all wedding related expenditure. For instance, if the means are limited, consider choosing an affordable venue, compromise on décor, limit the guest list; among others.
The last thing you should do is use credit cards or wedding loans for any large wedding expenses. It's best to avoid borrowing for a wedding. We will talk about wedding loans in detail in the latter part of the guide.
Instead, only use those funds you have accumulated via financial planning for this goal of your child's marriage.
Hence, it is important to not get carried away with emotions and plan your finances in advance.
There are several ways to make wedding of your children the most treasured memories of your life.
Hence, determine a practical and realistic amount that you would need for your child's wedding. Once an amount has been decided, determine the future value of this amount (taking into account rise in costs etc.) and begin saving for your goal.
Remember that, the earlier you start saving and investing for your child's wedding the lesser you will need to set aside per month to achieve your objective.
Chapter 2 :Wedding Loan
It is important to understand why many fail at retirement planning. And one big reason is, they start late.
At times, individuals are unable to set aside the requisite amount of money needed for their retirement. They can contribute only a part of it, not all. As a result, they end up postponing their plans.
In our view, this is a wrong approach.
Instead, the right course of action is to start off with what you have and make up for the deficit at a later stage. On the other hand, if you decide to simply wait for an ‘opportune’ time, it might be too late by the time you start.
Another reason for failing to start is that a significant amount of money is often spent on providing for one’s present lifestyle, i.e. shopping and entertainment binges, leaving very little for retirement.
While the importance of satisfying present needs cannot be denied, it does make sense to take care of your future as well. Ideally, one must strive to strike a balance between the two.
Finally, perhaps, drawing up a strong retirement plan and saving for the eventuality – retirement. Maybe the thought of growing old and leading a rather sedentary lifestyle brings with it a certain degree of discomfort and discourages some from working towards their retirement plan.
However, such mindsets need to change.
Looking the other way will only worsen the situation. The solution lies in accepting retirement as an eventuality and being adequately prepared for it.
Making an early start is your best bet at being prepared!
To plan your retirement there are few steps involved. Each step is explained in the next chapter.
What is Wedding Loan and how it can be used to finance wedding?
Wedding loan is a personal loan issued specifically to meet your marriage expenses. Often the wedding expenses overshoot, and parents are compelled to borrow money from family or friends.
You can opt for a wedding loan without any hesitation. But as mentioned earlier, first rationalise wedding expenses and make sure you avail of a wedding loan only to an extent that's absolutely necessary.
Wedding loans are personal loans specifically offered to meet wedding expenses.
Personal Loan Eligibility To Finance Wedding Expenses
Before you visit a lender to avail a wedding loan, do check your eligibility. This is dependent on several factors viz. your credit score, monthly income, other ongoing EMIs, etc. These terms vary from one lender to another.
The eligibility criteria are as follows:
-
Age Limit:
If you are a salaried employee, the age limit is 21-58 years. Age limit for a self-employed businessman or woman and professional is 25-65 years.
-
Monthly Income:
Your net monthly salary is crucial to sanctioning your loan. Some lending institutions have minimum monthly income criteria. While at some banks the eligibility criteria is Rs 25,000 per month.
-
Nature of Employment:
You may either be a salaried person, or a practicing self-employed professional or a business owner.
-
Employment Term:
If you have been job-hopping in the recent past, an approval could be difficult.
For instance, many lending institutions sanction loans to employees with at least two years work experience, and at least one year from your current employer.
Similarly, self-employed professionals must have a minimum of three years of experience. Some lenders consider your overall work experience.
-
Credit Score:
This is a score assigned to you by a credit information companies/bureau (for example companies such as CIBIL, Equifax, High Mark). It gives a prospective lending institution, a perspective about your credit history and credit behaviour as a borrower.
A high credit score also gives you the bargaining power to negotiate better loan terms for yourself. Some banks have a minimum CIBIL Score requirement of 700, while some have 750. A score in the range of 700-900 is desirable.
-
Minimum Loan Amount:
Banks provide a wedding loan from Rs 5 lakh to Rs 25 lakh; but ensure you borrow only to the extent that is extremely necessary, to avoid creating a pile of debt, so that you do not jeopardise your long-term financial wellbeing.
Always make it a point to compare personal loan across lenders and read the terms and conditions carefully before finalizing anything. Getting a loan is easy, but repaying might not be that easy.
Now, let us look at the approximate cost of loan for marriage purpose:
How much EMI do I need to pay on Wedding Loans?
Interest rates vary from one bank to another. Further, the minimum and maximum loan amount that every borrower can offer is different. Nevertheless, with a good credit score, you can negotiate for low interest rate.
The Equated Monthly Instalment (EMI) for a wedding loan depends on your principal loan amount, rate of interest, and loan tenure you choose.
Loan Tenure
The maximum tenure for a Personal Loan is usually 5 years. But the shorter the tenure of a personal loan, the better it is.
| Loan Amount (Rs) |
Rate of Interest (%) |
Loan Tenure (years) |
EMI (in Rs) |
Total cash outflow (in Rs) |
| 15,00,000 |
15% |
1 |
1,35,387 |
16,24,644 |
| 2 |
72,730 |
17,45,520 |
| 3 |
51,998 |
18,71,928 |
| 4 |
41,746 |
20,03,808 |
| 5 |
35,685 |
21,41,100 |
A longer tenure reduces the EMIs, making repayments comfortable. But opting for a shorter tenure (of say two to three years), although increases your EMI, makes sure that you do not keep the debt lingering for long, and has a positive bearing on the credit score.
Ideally, your wedding loan tenure should not be more than six months to a one year. Do note that some banks have a restriction on loan tenure depending on your employment status.
Interest rate
Currently, personal loans are being issued at the rate of around 13% - 15% per annum.
The interest percentage determines your EMI and has a bearing on your budget and long-term financial wellbeing. So, make sure you apply for a personal loan at the best interest rate.
The EMI you pay every month is an important aspect of your decision. Take care to stretch only within your means – do not go overboard.
Use PersonalFN's Personal Loan EMI Calculator.
Processing fee & other charges
Personal Loans are subject to processing fees and other (hidden) charges. The processing fee is a one-time fee levied by lenders. It is a certain per cent of the Personal Loan amount, but subject to a minimum amount.
Processing fees ranges between 0.5%-2% of your total loan amount. Loan foreclosure/pre-payment charges range between 2% - 5%.
A higher processing fee impacts your total cash outflow, while you apply for a Personal Loan.
The other charges include:
-
Stamp Duty (As Per The Stamp Act),
-
Default Interest Rate On The Overdue Instalment,
-
Late Payment Fee,
-
Cheque Bounce Charges,
-
Duplicate Interest Certificate Issuance Charge,
-
Duplicate Statement Issuance Charge,
-
Duplicate Amortization Schedule Charge,
-
Issuance Charge For Photocopy Of Loan Agreement/Documents,
-
Prepayment Charges (Also Known As Foreclosure Charges)
All of these should be examined carefully.
What are the documents required for Wedding Loan?
Banks and NBFCs thoroughly scrutinize your personal documents before approving a loan. They asses your loan re-payment capacity, current income, and basic other details as follows:
-
Proof of Identity such as PAN Card, Aadhaar Card, Voters Id, Driving License, etc.
-
Proof of Residence can be Aadhaar Card copy, Passport, Voters ID, etc.
-
Income Proof such as your salary slips, Form 16 and salary account bank statement if you are salaried employee. And in the case of self-employment, an acknowledged ITR for the last 2 years, Bank statement of the primary account for the last 6 months, trade license, and ownership of business are required.
Though the documentation process is simple and easy, it's better to have all documentation in order when applying loan for marriage purpose.
Why consider a Wedding Loan?
Typically, Indian weddings are a fancy and expensive affair. Even a decent low-profile wedding can cost you a fortune and erode your savings. But you have an option of Personal Loan, opt for it prudently:
✔ Only apply how much is necessary
✔ Opt for an affordable option.
✔ Stay within your budget
✔ Assess your savings first.
✔ Have a repayment plan in place
✔ Ensure you have adequate insurance
✔ Keep your family and spouse in the loop
Remember wedding is just a beginning of your new journey and not an end. And personal loans come at a cost.
You may opt for wedding loans only in case you are falling short of some amount to meet up the overall wedding expense. Avoid financing your entire wedding cost with the help of personal loan. Fix your personal finances and keep saving and investing wisely.
Opting for a loan is not a bad option, but the fact that you have to borrow money it means you cannot afford it right now. Hence, be cautious and avoid making any hasty decisions which might land you in a debt trap situation.
Use PersonalFN's Personal Loan EMI Calculator to calculate your cost before you opt on.
Chapter 3: Conclusion
Some things could be a necessity for a few, but luxury for you. It is for you to decide “what you need to have” and what can be “avoided”.
Stay away from mimicking, and instead focus on your budget/personal finances, in order to avoid debt and jeopardising your family’s finances.
To get your children married, save for the financial goal, but ensure that you’re biting only as much you can chew.
Start planning for your goals early. A longer investment horizon can facilitate better power of compounding.
Rationally estimate the future cost of marriage, recognising inflation.
Invest money systematically in mutual funds to achieve your goals.
Follow an asset allocation model by investing across asset classes like equity, debt and gold. Rebalance to debt as you approach your goal.
Don’t divert any investments already assigned for other vital financial goals like child’s education, your retirement for your child’s marriage.
And last but not the least, recognise the preferences of your children on marriage. They may not want to spend too much.
Further, if you need superlative value assistance in financial planning, reach out to us on 022-61361200 or e-mail at info@personalfn.com. We will be happy to hear from you.
Till then...
Happy Planning!
Author: Rajani Vyas