Top Four Things You Must Do While Planning Your Child's Future
Written on Thursday, June 1, 2017
By Viswajeet Parashar - Sr V.P and Group Head - Marketing
As a parent, you must deal with the immediate needs of your kids and should be equally focused on their distant needs, so that you can have a proper plan for their future. Child Future planning is all about perceiving a future for your child and doing the best as a parent. While doing this, you should communicate with your kids to get a glimpse about their future aspirations.
Shaping the future of your child will require a lot of investment on your part- investment in terms of time, money, love, and efforts. However, no parents need to be told how to love their kids or how to understand them, so this blog will only talk about how to best put your money into work to financially secure your child's future.
1. Start Investing Early For Your Child
She has just started to walk or he is just in pre-school, if you think these moments are too early to start investing for your child's future, then think again. In fact, when it comes to investing there is nothing like too early but yes there is definitely something like too late. Investing early always give you the biggest edge or benefit of investment, i.e power of compounding. Precisely, early start gives your money time to grow.
A simple calculation
If you start investing Rs, 2000 from the first birthday of your son, then by his 20th birthday, you will accumulate Rs 30,31910 (30.3 Lakhs) @ 15% growth rate.
A simple calculation If you start investing Rs, 2000 from the first birthday of your son, then by his 20th birthday, you will accumulate Rs 30,31910 (30.3 Lakhs) @ 15% growth rate.
Now the thing that you must understand here is, you have invested Rs. 480000 (4.8 Lakhs) in both the scenarios. But early start gave you a benefit of almost 20 Lakhs, which is literally a big amount. So don't wait for any so-called right time, start investing for your child with whatever you have but do start early and invest regularly.
Tip: Investing in mutual funds through Systematic Investment Plan (SIP) is a better way to accumulate a good corpus for your children's marriage or higher education. Read more about SIP.
2. Set The Right Goal Amount
You know that your child's higher education and marriage are definitely on cards and these are big financial goals for you. So how would you decide your goal amount? Just designating any random amount as your monthly saving for your child is not a right approach
Rather you should first have your goal amounts like 30 Laks or 40 Lakhs and then depending on how much time frame you have, you must start investing. While deciding your goal amount, you need to consider the inflation. Education Cost Inflation Rising Rapidly Do you know that according to a report published in Economic Times "At an average running education-cost inflation rate of 10%, a four-year engineering course that costs Rs 8 lakh today is likely to set you back by Rs 17 lakh in another eight years' time." So, don't just assume that your child will need so and so amount for studies or marriage. Here proper calculations need to be done so that your investment gets a stand against the rapidly increasing inflation. Tip: To know the future value of money, you can use online inflation calculator.
Tip: However, just knowing this not sufficient to set your goal amount. For a proper analysis of your need and goal setting, you can take help from professional financial service providers. They will also help you with right investment products as well.
3. Give Your Child the Protection Shield
Your child's future is definitely bright as you will leave no stone unturned but you always need to be ensured about their future's security Here, insurance is a very sensible step that every parent should take. It gives you the sense of security that whatever financial support you have planned for your child will always be there. Apart from making the regular investments for wealth creation to support your child's future, you should integrate insurance as well in your children future planning.
Health insurance gives you the security that you will always be financially sound to take care of your child's medical needs. It also ensures that if any health casualty happens to you or your spouse, you don't have to dig through your savings dedicated to your child.
Life insurance gives the security that in the event of the death of the policyholder, the child will get the sum assured and all future premiums will get waived off, meaning you will have a legacy to pass on.
Apart from this, you should also ensure your heavy loans, like home loan, so that in the case of any crisis the EMIs get adjusted and your child's future doesn't get affected.
4. Always Support Your Child But Somewhere You Have to Stop
Children will always have you at their back, but after a particular age or time, they should become independent as an individual. Don't over do your financial support. Let your child learn how to acquire financial independence. The only point here is, avoid pushing yourself too much to fulfil each and every financial wish of your child, and most importantly don't compromise your retirement planning while saving for your child's future.
Your retirement is also an equally important financial goal, read more.