Your First Child and Top Ways of Financial Planning
- DetailsWritten by PolicyBazaar -
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Updated date : 12 February 2020
One of the most important things that young parents should do is planning for a secured financial future for their child. But not everyone knows where and how to begin. As the child grows every parent thinks about building a corpus for the child’s future education expenses and marriage. In addition to that, there are various other short-term and long-term goals that the parents would want to achieve.
So if you take a step ahead when the child is born like investing in some investment instruments or in one of the best child plan in India; can actually help in accumulating wealth for your child’s future.
When a child is born, there are a lot of gifts that parents receive but hardly anyone suggests about long-term financial planning and budgeting for the new family member.
Financial Tips for New Parents
Plan Your Monthly Budget Again
Budgeting is an important part of financial planning and when a baby arrives in the family the expenses increase too. Not everyone realizes that this change will be significant. In addition to routine expenses on baby care products and medical expenses, there are future expenses that one needs to prepare for in advance. For this reason, you need to revise your monthly budget and increase it by a minimum of 10 percent in the beginning.
Also, you would need to take into consideration the day-care or nanny’s expenses, especially for working parents. To be on a safer side, you can add another 10,000 to 15,000 in your monthly budget in the initial months. And that can be increased with subsequent years.
Update Health and Life Insurance
Most of the medical insurance plans cover newborn babies soon after the completion of 90 days. It is suggested to add your child to your existing family floater health plan. Also, try and update your existing policy and buy a new policy if the existing one is insufficient.
Usually, health insurance plans do not cover the child soon after birth, but you can find some health plans that offer the same. But usually, the child is covered from 90 days onwards. This helps in saving a huge amount including a child’s medical expenses, vaccinations, etc.
Consider Investing for Higher Studies
As the education expenses are growing it is important to invest in your child’s education and the earlier you start the better it is. The cost of higher education is also growing and if you start saving or investing now it will be more beneficial. If you do not invest, there might be chances of you taking an education loan and that comes with high interest charges.
It is important to make smart spending choices, choose short and long-term investment instruments to build the corpus. If you spend smartly and save wisely now it can help you and your family in the long run. You can always start putting some money aside for your child’s higher education, marriage, etc.
Invest in a Child Education Plan
In order to save you can start investing in child education plans to ensure that your child is secured even in your absence. Investing in ULIP linked child plans like HDFC child plan that pays you the fund value at the end of the completion of the policy term. The best part is that you can buy this plan for a minimum of 10 years and a maximum of 40 years. It offers both life insurance cover and market linked returns allowing 10 free switches among the funds. You can select from three plan options namely Invest Plus, Premium Waiver option and golden years benefit. If you opt for premium waver the insurance company will pay the premium in case of your untimely death. And you can opt for the golden year’s benefit that offers life coverage till 99 years.
The plan offers a death benefit to the insured that includes 105% of the premium paid or the sum insured amount (exclusive of the partial withdrawals). You can also consider the SBI Life Smart Scholar plan that pays the maturity amount in lump sum and the premium is also waived off in case of an eventuality.
Investing in Sukanya Samriddhi Yojna
Another good investment scheme that you can consider is Sukanya Samriddhi Yojna. This child investment plan is designed to help you build the desired corpus for your child's education/higher education. The Sukanya Samriddhi Account is tax free and offers an interest rate of 8.5 per cent. And if you have a girl child this is a good option. You can save for her education, marriage
There is also a tax benefit offered u/s 80C of the Income Tax Act. So, if you have a girl child and plan to save for her marriage or her education, you can go for this scheme. Again, the lock-in is the only worry, but, then you are building a sound corpus for a longer time. There is a lock-in period of 21 years. Once the girl is 18 years pre-mature closure is allowed in case of marriage. Moreover, a maximum of 50% (partial) withdrawals to meet the expenses for higher education.
Timely there can be a revision in the interest rates by the government and the interest rate offered is higher than what is offered by banks. Also, time and time there could be.
There is no better gift than a promising future for your children. And if you start planning now you can help them pursue the career they want. Mentioned above were some of the investment schemes that you can consider for your child. However, it suggested that you invest in a child education plan that offers death benefits and maturity benefits both. If you haven’t purchased one yet, you can gift this to your child on this birthday as it makes a perfect gift for
Long story short
Having a child in life is an amazing experience. Like every parent, if you also wish to secure your child’s future then you can following the above-listed schemes and enjoy the sense of satisfaction.
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