On a beautiful late spring afternoon, twenty five years ago, two young men graduated from the college. They were very much alike. Both had been better than average students, both were smart and both had ambitious dreams for the future. Recently, these men returned to their college for their 25th reunion. They were still very much alike. Both were happily married. Both had a kid. And both had gone to work for the same industry and held similar positions in different companies.
But there was one difference. One of the men’s kid has completed M.S from a reputed university in USA and the other kid has completed a graduation from a local university. What made the difference?
Have you ever wondered, as I have, what makes this kind of difference in our kid’s career? It is a carefully thought out long-term planning for child’s future.
As a responsible parent, you would not like to compromise on your child’s career, regardless of rising cost of education. You need a well developed investment plan for your child’s future. A plan that will allow you to meet all future expenses for your child.
Provision for Medical Expenses
Health care for mother and child will be a potentially handsome expense for new parents. New babies require regular checkups and immunizations even though if your child is in good health. So you need to make provision for these expenses well in advance even before the arrival of your baby.
Add the Newborn to Your Mediclaim Policy
If you have an individual mediclaim policy, add the newborn as a member in that policy and get coverage. Do you have an employer provided mediclaim policy? Then, check if the terms and conditions allow you to add the newborn for coverage. If it allows, then add the newborn to that policy. If it doesn’t allow then take an individual mediclaim policy for your kid.
Increase Your Term Insurance Coverage
Check whether the existing insurance coverage would be sufficient to support your child’s future and in case of any mishaps. If it is not sufficient, take a term insurance policy for the gap.
Ongoing Educational Expenses
The educational expenses are skyrocketing year on year. What your father spent for your college education, is now you need to spend for your kid’s primary school education. So adequate provision in your monthly budget and a projection for cash flow with reference to school education expenses will be an important exercise for you
Financial Planning for Higher Education
It is going to be a biggest financial shock for you, if you have not properly planned for your kid’s higher education. Don’t delay this plan, start this plan as soon as the arrival of your newborn. You will then have time on your side.
Assume your kid has completed his/her schooling today. Imagine how much you may need to spend for higher education at today’s costs. This cost is going to go up year on year because of inflation. So project this cost with inflation rate for the future. Now you will know how much exactly you may need for higher education in future when you kid is actually completed its schooling.
Other Dreams for Your Child
Apart from the higher education, you may have some other dreams like buying a home for your kid, corpus setup for your kid’s future profession or business or corpus creation for wedding expenses. You need to follow the similar steps as mentioned in ‘Financial Planning for Higher education’ for these dreams also.
In case you don’t have time or knowledge to do this financial planning you can seek assistance from professional financial planners. They will save your time and make sure that you are achieving these financial goals for your kid.
Savings Account for Your Child
Open a savings account in the name of the minor. Whatever gifts, the kid receives by way of cheque or cash on the occasions like birthday can be saved there. Also this account can be used to motivate the kid to save from its pocket money.
The other investments which you make for your children’s future like mutual funds or shares need not be invested in the kid’s name. Banks, generally, don’t give loans against shares or mutual funds held in the name of a minor. So, invest it in your name. As and when required, you can en-cash them to meet the necessary expenses for you kid.