Here's a guideline on how you can provide for your children's needs.
Benefits of financial planning for your children
Financial planning for your children is an important aspect of securing their financial future. This can help you stay financially prepared for the expenses towards your children and ensure that they have the necessary resources to pursue their dreams. It provides them with a sense of security and stability.
Financial planning for your children can help you with the below:
Staying covered for expenses towards primary and secondary educationExpenses towards your children’s primary and secondary education can be significant. These may include their school fees, tuition fees, expenses towards uniforms, books, extra-curricular activities, and more. Planning for these expenses in advance can enable you to stay financially prepared for your children’s education needs.
Supporting higher educationYou will need additional funds as your children pursue higher education. Expenses towards higher education may include college fees, travel, boarding, books, study equipment, such as a laptop, and more. With the right financial planning, you can ensure that your children have the financial support they need to pursue their dreams without worrying about the costs.
Beating inflationInflation is the increase in the cost of goods and services. It is important to stay prepared for inflation as it leads to an increase in your expenses, which can affect your budget. Investing in the right plan can help you beat inflation and continue to stay financially prepared, without worrying about rising costs. This way, your children can lead their preferred lifestyle, no matter what.
Supporting your children’s interests/dreamsYour children would have interests and dreams that they want to pursue. They may like to learn a musical instrument or play a sport. They may also like to travel, paint, or learn dancing. The right financial planning can help you support their interests and dreams. This can help them grow as individuals and pursue their passions in life
Covering future expenses related to marriageYou need to save adequately for the expenses towards the marriage of your children. These expenses may be significant, depending on how you plan the marriage. Financial planning for children can help you save money for these expenses and stay worry-free.
Start planning early
An earlier start in investing for your children's future improves the odds of higher returns. Here are the reasons:
The power of compoundingThe interests generated from your investments get added to the original amount invested in the first year. The base amount for the next cycle thus becomes higher than your original investment. The cycle repeats every year, leading to significant growth in your wealth. Therefore, the longer you invest, the higher are the profits earned.
Reduced effect of market volatilitiesFinancial markets often fluctuate. But with a long-term financial tool, market volatility is smoothened in the long run. This helps in giving better returns on the investment over a period of time.
Nominal investmentsThe returns from a financial plan depends directly on how long one is invested in it. Therefore, a small amount of money, invested regularly, can grow to a large sum over a period of time.
Evaluate children's future needs
You need to support your children until they start earning. Hence, you should consider every expense that may arise in the future, to save adequate amounts for them.
In addition to the basic requirements of your child, remember inflation when you calculate the funds needed for your children's future. Preparing for inflation will help you plan better for the future value of costs.
Secure your children with life insurance
Life insurance is a great financial instrument that will help to secure your children's future. ULIPs are ideal for long-term goal-based investments. It is a unique investment instrument that provides chances of higher profits along with the added protection of life insurance. You can select your investment channels basis your risk appetite and switch funds if they underperform, thereby maximising gains.
Opt for child plans designed to support children's needs with premium waiver benefits. This ensures that in case of an unfortunate event, your children receive the payout without having to pay the future premiums till the end of the policy term. Hence, they will have enough funds to shield them from financial shortfalls in your absence.
A secure future depends on being financially prepared for the key milestones of your children’s lives, such as college admission, marriage, and buying property. You can better manage the funds if you prioritise the goals and accordingly create separate investments for each need.
Parents often consider children's education as the top-most priority. An education cost calculator can help you find out the amount you need for your children's education in the future.
Child plans are ideal for ensuring funds for your children's future needs. Many new-age policies offer multiple features which will help grow your investments and secure educational funds for your children. You can invest small sums regularly without having to bear the burden of a lump sum investment. Thus, when your children are ready, a large amount is also ready to fund their goals. Invest today in the right financial plan to fulfil the dreams of your children.
1. Is it important to plan your child's future at an early age?
Planning for your child’s future is crucial. The sooner you start, the better it is.
- The earlier you invest; the more time you give your money to grow. Your money can benefit from the power of compounding, helping you earn higher returns
- You can minimise risks associated with market fluctuations if you invest for a longer period of time
- You get the flexibility to make smaller investments over time, making it easier on your pocket
When you start early, you have more control over your finances. This helps you ensure your child’s dreams and goals are fulfilled, no matter what!
2. How can you decide the right child plan for your child's future?
It is always advisable to choose your plan basis your child’s needs and goals. You must calculate the approximate amount you would need to fulfil the same. Factors such as inflation must also be considered. Additionally, before choosing a child plan, calculate the time frame in which you would require the money.
You must also ensure that the plan provides a large life cover* to provide financial security in case of an uncertainty.