Bringing a new life into the world comes with a lot more responsibilities as well as financial liabilities. When it comes to securing their child’s future, parents need to plan everything out in advance.
Only the best child plan would cover several aspects. It would also take into account the various phases of a child’s life, including their education, healthcare, and even marriage.
To ensure that children’s future is financially secure and comfortable, parents should take into account factors including the cost of higher education, the size of savings, etc. As such, there are certain pointers which you should take into consideration to ensure a proper future for your child.
In this article
- Use the Power of Compounding To Your Advantage
- Start Early
- Have A Comprehensive Insurance Policy In Place
- Take Inflation Into Account While Planning
- Protect And Prioritise Vital Goals
- Select A Premium Waiver Plan
- Invest In High Yielding Schemes
- Include Partial Withdrawal Plans In The Portfolio
- Appoint A Nominee
- Keep Reviewing Your Plan Periodically
Use the Power of Compounding To Your Advantage
A lot of funds go into availing higher education from a decent educational institution. Keeping this in mind, parents should try to build a strong corpus for their child’s education fund planning.
As a parent, you should factor in the reality that the cost of availing education over a decade from now would be more expensive.
Instead of relying on traditional investment tools like FDs, you should explore investment avenues that help you compound your earnings to a great extent. Your ultimate aim should be to build a child education fund that is sufficient to meet your child’s financial requirements even when you are not around.
Plan a better education for your child, by choosing a systematic investment route like SIP and avail benefits like compounding to build an education corpus faster.
The table below offers a better understanding of the associated benefit of routing investment through SIP –
|Product||Debt Funds||Balanced Funds||Equity Funds|
|CAGR Yield (%)||8%||12%||15%|
|Monthly SIP||Rs. 29431||Rs. 21011||Rs. 16224|
With early investments comes the benefit of extended time horizon, ability to weather greater risks and the opportunity to earn higher. If parents begin to practice financial planning for children soon after they are born, they would be better equipped to cushion their future.
The benefit of early financial planning for children would provide better outcomes if they invest in schemes with a long-term trajectory.
Here is an example of the same –
|SIP Tenure||18 years||15 years||12 years||8 years|
|SIP required||Rs. 10179||Rs. 16224||Rs. 26617||Rs. 56237|
Have A Comprehensive Insurance Policy In Place
Just having a strong investment plan is not enough to secure a child’s future. You also need to take into account other unforeseen situations and dangers pertaining to their life as well.
It is crucial to get a child’s life insured; apart from having the best child plan in place. Also, pick a child insurance plan that offers extensive coverage and comes with an array of benefits.
Take Inflation Into Account While Planning
As per a research conducted by the National Sample Survey Office, the cost of any professional degree/course doubles in 6 years. In tandem, inflation is yet to be curbed in the Indian financial sphere.
To protect a child education fund from being eroded, parents must factor in the rate of inflation. It will help them to plan the future of their child better. It will also keep them mentally and financially prepared for the impending percussions of inflation on their corpus. By incorporating the best child plan that cushions the blows of inflation, you prevent your savings from eroding.
Protect And Prioritise Vital Goals
Financial planning for children is indispensable for securing a child’s future. But what adds on to its value is that it accounts for all their goals and prioritizes them in a feasible order.
To be better equipped for pursuing a particular goal for their child’s future, parents should ensure that they cover each plan separately.
They can even take up separate term plans to safeguard important goals. It will increase the probability of achieving each goal significantly.
Select A Premium Waiver Plan
Life is full of uncertainties. But even in case of an event concerning the unfortunate demise of a parent or guardian, the child should at the least have the necessary financial backing. Such monetary assistance is vital to help the child at the very least achieve their educational goals.
Make sure that the best child plan you intend to avail for securing your child’s future comes attached with this addition.
Invest In High Yielding Schemes
With the practice of early financial planning for children, individuals also avail the opportunity to invest in high yielding schemes that comes with greater risk. High return funds have the potential to outperform other asset classes and are considered effective in building a corpus faster.
The long-time horizon of such financial plans further allows investors to stomach greater risks and recover from losses better.
Include Partial Withdrawal Plans In The Portfolio
It is a wise decision to always be prepared for emergencies. Individuals should make contingency plans and put together a child education fund that helps them tide over financial crunches easily.
But such funds or plans would prove to be most helpful if, at times of emergencies, they come with a provision of partial withdrawal. The ease to withdraw funds would act as a boon at a time when fulfilling a need for a child’s future is more urgent than others.
Appoint A Nominee
Appointing a responsible person as a nominee would prove useful in the event of the death of parents or guardians. Hence, it is very important to choose a nominee who can be relied upon, because they would be responsible for getting the claim amount until their child turns into an adult.
Keep Reviewing Your Plan Periodically
To ensure that you plan a better education for your child, make it a point to review your financial strategies.
Parents who indulge in reviewing and modifying their child education fund planning are more likely to account for the factors that may erode their potential savings for child’s fund in the future. This directly helps them to adjust their investments, savings and strategies accordingly and helps them maintain sync.
Besides following these rules, parents should adopt a financial plan that will help them and their children face a crisis with ease. Embracing a comprehensive child education plan will not only help to reduce doubts but will also help eliminate fears that arise due to financial insecurity.