One of the biggest mistakes a lot of Indian parents make is planning for a baby before getting their financial matters in place. Many parents are under the misconception that just because they have a well-paying job, they can afford to have a child.
But the reality is not as simple as it sounds. Right from prenatal tests and supplements to maternity clothes, there are bound to be expenses even before you can hold him or her in your arms!
Hence, it is important to understand the expenses that arise with raising a child and plan accordingly – so you never have to decline their reasonable demands.
While there are several expenses important for survival and day-to-day lives, there would be certain expenses that happen for a finite period of time but are huge. Such expenses include marriage and education.
Either way, one needs to be aware of three things while making financial plans for their child – how much money would be required, at what age/time, and for how long.
5 Tips for Financially Secure Your Child’s Future
Considering the above-mentioned points, here are some general guidelines for you to plan your child’s future in such a way that you can be a good parent and provide them with everything they need, and enable them to fulfill their dreams.
1. Consider Investing in Child Insurance Policy
It is advisable to look for a policy that gives enough flexibility, in which you do not need to lock away your money for the majority of your life. An ideal child insurance policy would ensure that you get money to spend in a timely manner, while in case of any unforeseen circumstances allowing you to withdraw the money.
Also, the best policy should offer the flexibility to spend money as and when required. Finally, a policy that will protect your child even after your demise would be a big boon. Consider the child plans offered by various players in the market.
2. Consider Getting Life Insurance for Yourself
A child insurance plan will cover the financial needs of children, but you must also get life insurance for yourself. This will help support your family in your absence and also ensure that not all of your funds are stuck in a single policy and you have any places from where you can withdraw money when needed.
3. Invest in SIPs
A SIP gives you a great return on investments. It is a flexible investment as you can discontinue a SIP at any point in time. It is a great way to put some money into luxuries or unexpected expenses later. It can be a vacation, a weekend home, or for a child’s education.
4. Set up a Fixed Deposit
SIPs might look more lucrative, but they are subject to market risks. On the other hand, a Fixed Deposit is a more traditional form of investment but would offer you sure-shot returns. The best way to go about it can be to get involved in some mix-and-match. Have a couple of fixed deposits, and pick the terms in such a way that the FD matures with an important milestone.
For example, one could mature by the time your child completes school, and another could reach maturity by the time he/she completes graduation. Maybe when the third one matures, you can throw him/her a lavish wedding or invest in buying a property for your child. With Fixed Deposits, if you choose NBFCs, you can also get additional benefits such as flexible tenors and higher interest rates.
5. Set up a Bank Account for Your Child
Setting up a bank account for your child might not seem like a big deal right now, but it will go a long way in teaching banking and finance to your child in the future. Understanding finances from a young age is what children need these days.
Instead of pocket money, you can deposit money in their bank account. That way, they can budget their expenses, save and keep a track of where and how they spend their money.
You too can keep track of how much your child spent and where in order to guide him better about finances and also managing the expense of the house. The best decisions we make in life are well thought out and taken by considering all outcomes.
They need a rational and calm mind. Financial planning for a child is the same. By taking a few diligent investment decisions and by planning your finances wisely, you can ensure complete management of finances for your child right from birth.