A sound financial plan is essential to provide your children with a secure future. It is important to make investments basis your children's dreams and future cash flow requirements. You must also time the investments in such a way that the returns are received during the major milestones of your children’s lives, when the funds are needed most.
Here's a guideline on how you can provide for your children's needs.

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 compounding
    The 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 volatilities
    Financial 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 investments
    The returns from a financial plan depends directly on how long one is invested in it for. 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. For example, in June 2019, the Consumer Price Index for education in India had increased almost by 52.5% since 2012. 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 benefit. 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.

Prioritise goals

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 prioritize 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.

Conclusion

Child plans are ideal for ensuring funds for your children's future needs. Many new-age policies like ICICI Pru SmartKid Solution 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 fulfill the dreams of your children.

COMP/DOC/Nov/2020/411/4734

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