“If there must be trouble, let it be in my day, that my child may have peace.” ― Thomas Paine
This quote very effectively summarizes every parent’s desire for a safe and secure life for their child. The concept of safety and security here includes all aspects of life – physical or financial. Every parent naturally wishes that their child be able to receive the best education and facilities and live a healthy and prosper life.
There’s nothing to argue about that raising a child is a great responsibility but if the child is a girl, this responsibility becomes even greater due to cultural norms – specifically the Big Fat Indian Weddings, which nearly every parent of a girl needs to plan for.
On the other hand, ever-increasing cost-of-living makes the job even harder. According to a recent report, as of 2018, In India, a middle to an upper-middle-class family on average spends about ₹67.4 lakh on raising a child to the age of 21 years. This amount is about a 22.54% increase over the amount of ₹55 lakh in 2011.
This brings in the need for carefully crafted financial planning that can pave the way to a financially secured the future for your child. There are many investment methods that the parents of a newborn child can take advantage of. Below are the five ways that can you can use secure the future of your child.
- Set up an Education Account
One thing that parents need to plan more than anything else, is the education of their child. And why not? Providing a good education to their child is the dream of every parent. However, with the costs of education increasing every year, we’re seeing a lot of burden on parents.
The ideal way to save for your child’s education, especially college education, is to start saving early. Parents can set up an education account as early as when a child is still a toddler or even before the child’s birth. This should help parents in saving a decent amount, so when the child goes to college, parents wouldn’t need to worry about funds.
- Take a Life Insurance Policy
Parents have a natural tendency to fear for their child’s well-being, often about scenarios involving something happening to them. However, life insurance policies certainly help to ease these worries to some degree.
One key aspect of life insurance policies is that they accumulate value over time, which means the longer you have a policy, the more value it gains. So even if nothing happens to parents (which is what we’d all hope for), a life insurance can still be an effective tool for saving.
Additionally, parents can also take out a life insurance policy for their child in order to cover his/ her life and health.
- Systematic Investment Plan & Mutual Funds
There are many investment tools that allow investments in regular frequencies, such as Systematic Investment Plan (SIP) and mutual funds, which allow investing a fixed amount on the weekly, monthly or quarterly basis. This means investors don’t need to struggle with keeping a track of individual stock prices.
It is often recommended that the SIP investments should be kept for long-term because their ability to compound the invested amount, which can generate a good amount of wealth over time, depending on the investment duration.
Parents can also take advantage of mutual funds that are specifically designed for child benefits. One example is the SBI Magnum Children’s Benefit Fund from the SBI Mutual Fund. The SBI MCBF is a solution-oriented scheme which allows earning mostly via through investment in debt and money market instruments. You can easily invest in clear funds to take full benefits of SBI MCBF scheme.
- Open Child’s Saving Account
If parents want to financially secure the future of their child, they may want to consider that it’s not a task that can do with only their contribution. Involving your children in the financial planning will certainly go a long way because if they develop good financial habits, they can save some money on their own for themselves.
If the child receives some kind of allowance from the parents, a child’s saving account can an effective tool for saving money while at the same time helping to teach the importance of money savings to the child.
Initially, when the child is young, parents can deposit money in the child’s savings account and when the child is old enough, parents should encourage their child to contribute his/ her share of savings in the account.
- Make a Will
The future is uncertain of course, with no one knowing what will come next. In a life full of uncertainties, it becomes an increasingly crucial priority to ensure that your child is taken care of when you’re gone. An ideal way to achieve this goal is by writing a will.
Don’t underestimate the importance of the will. It can be a critical tool for securing your child’s future in your absence. A clear and comprehensive will can ensure that when you’re not around, your child inherits all your assets without any problems or disputes.
Becoming a parenting is a life-changing experience. Taking care of and raising a child can be a difficult and overwhelming task. However, effective financial planning will certainly help to lift off some pressure. Parents can even take advantage of many schemes run by the central and state governments, especially for girls, such as Sukanya Samriddhi Yojana, Ladli Laxmi Yojana, etc.
Nevertheless, educating your child about financial planning should be an equally important priority for parents because sooner or later, your child will take his/ her own financial decisions and having prior knowledge of financial planning will help them to take the right decision.