5 Rules To Keep Your Child’s Future Financially Secure

Updated on :  

08 min read.

A child comes with a lot of responsibilities for parents. All parents strive to give the best to their children and secure their child’s future. Planning your child’s future well in advance will prepare you for many stages of your life. The best plan would cover all the vital phases of your child’s life like education, higher education, health care, or even a wedding.

Keep the below-mentioned things in mind for planning a secure financial future for your child:

1.Start investing as early as possible

Some parents wait to start saving and investing for their children till they cross primary schooling. Starting to save late could lead to sacrificing good higher education for your child. You cannot ignore that education is getting costlier with time with no hopes of getting any better.

If you start investing sooner, as early as from your child’s birth, you will find yourself in a better position to invest in moderate risky instruments giving better returns in the long run. Also, the benefit of starting to invest early is that you will have time to correct your investing decisions if the need be.

Instead of investing in low risk fixed income securities, one should explore different avenues of investments that will provide higher returns in the long run. A good idea would be to start with a SIP and enjoy the benefit of compounding.

However, as this is long-term planning, make sure you are timely reviewing your child’s fund in intervals for any rebalancing. This will enable you to adjust your investment strategies according to the market conditions and your goals.

2.Invest according to child’s short-term and long-term goals

It is essential to divide the financial goals of even your children into short term and long term. Short-term goals can include all the expenses you must incur within the next 1-2 year, like school fees or any kids’ extracurricular activities fees.

Long-term goals would consist of university admission and fees, abroad education, child’s marriage, etc. Parents can start investing for both short term and long-term goals. For long-term goals, equity investments can be considered, which offer moderate risk with good returns.

For short-term goals, surplus funds can be invested in liquid assets like FDs or debt funds relatively less risky.

3.Purchase health and term insurance covering your children

Having a robust investment plan is the first step; however, it’s not enough. Good financial planning is incomplete unless your children are protected under a good health and life insurance plan. Consider all the terms and conditions and how they will affect while selecting a plan.

While purchasing life insurance to protect your family and children, make sure you select a premium waiver plan that will provide financial backing to your family in case of unfortunate events. 

4.Look for partial withdrawal investment plans.

If you start early, investing in your child’s future will be a very long-term investment plan, maybe for 15-20 years. The instruments that provide both securities and good returns come with long locks in periods.

One must be aware of all the terms and conditions of such long-term investment, and the instrument that allows easy withdrawal of funds for fulfilling a child’s future needs would act as a boon. Investments that are not helpful in emergencies will be regretted later on.

5.Appointing a Nominee

Appointing a nominee for all investments you make for your child would be a responsible move. At times, appointing a nominee is neglected. If selecting a nominee is missed out, the child may face issues in case of unfortunate events. Hence, think about all the possibilities and nominate a person reliable from your family as a nominee.

Thank you for Reading!

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