Planning for your child’s future is an act of love and responsibility that can set then on a path to success and financial security. So on the occasion of World Financial Planning Day 2023.
A detailed guide on how to prepare for your child’s future effectively:
A child’s birth is one of the most important occasions in one’s life, aside from celebration; it makes parents feel grown-up and like they have more important things to do. It also brings significance of financial well-being.
Interestingly, when it comes to prioritizing our goals, planning for child future plan is even a shelter above retirement planning.
Let’s first understand why is it important to do child’s future planning:
Planning for your child’s future is an investment in their dreams. It offers financial security and supports their growth. Here’s why it matters:
Education is vital for your child’s future.
Planning financially ensures access to quality education, unlocking numerous opportunities.
- Medical Security:
Building medical emergency fund so that it take care of any illness or medical emergency of child.
- Dreams and Aspirations:
It empowers your child to pursue their passions, interests, and dreams without financial constraints holding them back.
Teaching your child financial literacy and responsibility early on equips them with essential life skills.
First stage: Pre child’s birth financial planning
How can you prepare for your child’s future even – before they are born
So, what the solution, the solution is to plan ahead for life-changing events like having a child by creating a strong financial strategy from the start.
Consider purchasing a health insurance policy that includes maternity benefits.
With rising hospital costs and checkup expenses, this feature can ease the financial burden.
If you’re employed, also check if your employer’s policy offers this benefit.
Create a baby fund
to cover vaccination and medical expenses by saving a portion of income each month.
Adjust the amount if necessary, especially if one parent plans to quit work after maternity leave.
Buy baby equipment smartly
to save money while ensuring safety and comfort.
Check for deals and consider secondhand item from friends or stores.
Second Stage: Post child’s Birth Financial Planning
As your child grows, childcare costs remains significant, including school fees, after-school care, and more, like higher education and marriage. People treat sons and daughter equally nowadays, but societal expectation like extravagant weddings for daughters still exist.
Financial planning is crucial to manage these expectations and secure the future.
Create Long Term child’s future fund
In order to fulfil these future goals like education and marriage of your children. To overcome this particular challenge following ways of investment can be helpful.
Start Saving Early:
When you begin saving money for your child when they’re little, it can grow a lot over time because of something called “compounding.” Even if you save just a little bit regularly, it can turn into a big amount as time goes on. You can start by putting money into a special account just for your child, and this helps set up their money for the future.
For Example: Create ₹22 lac approximately for your child’s education at the age of 18 by investing ₹2,000 a month into a 15%-interest account from the time they are born. You will accumulate wealth of ₹ 17.8 Lakhs over the course of 18 years
Adjust Cost of expenses according to Inflation:
When planning for your child’s future, remember that prices go up over time due to inflation. So, you should figure out how much money you’ll need in the future, considering this increase in prices. This will help you set a realistic money goal.
Inflation makes prices rise over time.
For example, if a ₹5 lac for MBA today has a 8% inflation rate, it would cost about ₹10.5 Lac in 10 years, highlighting how things get more expensive due to inflation.
Pick Your Investments:
After you know how much money you need, choose how you’ll invest to reach your goal. You can invest in things like stocks, bonds, or mutual funds.
These financial assets, like mutual funds, can help you earn more money than what prices typically go up by (inflation) over a long time. For example, mutual funds often make around 12-15% extra each year over a 10-year period.
Some basic steps to plan investment in mutual funds are:
- Commence saving with proper asset allocation:
Mutual funds are considered to be smart way to save for your child’s future.
They earn interest, which the fund manager invests in stocks and bonds.
This investment can be done in mutual funds through mysiponline.
With the help of mysiponline investment into funds like:
HDFC Children Gift Fund
SBI Magnum Children Benefit Investment fund can be done.
Returns generated since launch of these funds are 16.18% and 42.28% CAGR respectively.
These funds are considered as one of the best funds for child’s future planning.
- Specific money for fulfilling customs:
Invest in digital gold with tiny investments that can add up to a large accumulation when needed. Which can be exchanged for actual gold.
For Example: you invest ₹1,000 monthly (₹12,000 yearly) in digital gold for 10 years, totaling ₹1,20,000. With a 5% annual return, it grows to about ₹1,66,386, providing a practical way to save for customs or cultural traditions like your daughter’s wedding without a large upfront expense.
As we suggested in retirement planning is equally important as child’s future planning so as to set free the children from the burden retirement preparation is important.
For good retirement preparation mutual fund has developed some good retirement products
Plan retirement wisely for children’s happiness. Don’t burden them after marriage or when after commencement of their carriers.
Become independent after retirement by investing money in mutual funds through mysiponline.
Some of the good funds for retirement planning are
HDFC Retirement saving equity fund and
Nippon India retirement wealth creation fund.
Returns since inception of these fund is 18.9% and 8.98% CAGR respectively.
These funds are considered to be best or retirement planning.
Child’s future planning requires a lifelong commitment.
Goals should be set, budgets managed wisely, savings initiated early, and guidance offered with care.
Involvement holds as much significance as financial aspects, forming the basis for a successful future for the child.
So, get Started today and invest in mutual funds through mysiponline.