Plan and Make a Difference to Your Child’s Future

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On a beautiful late spring afternoon, twenty-five years ago, two young men graduated from the college. They were very much alike, these two young men. Both had been better than average students, both were smart and both were filled with 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.

Provision of 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 the baby.

Adding 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.

Increasing your Term insurance coverage

You need to check whether the existing insurance coverage is sufficient to support your child’s future or not in case of any mishappening to you. If it is not sufficient then take a term insurance policy for the gap.

Ongoing educational expenses

The educational expenses are skyrocketing year on year. What your father has spent on 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 the 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 the newborn. Then you will have time on your side.

Assume your kid has completed today his/her schooling. Imagine how much you may need to spend on 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 your kid has actually completed its schooling.

Education Planning Calculator

You can use the education planning calculator shown below to plan a better education for your children.

You can browse through the brochure of your choicest universities, where you want to educate your children and find out their total current fees.

Let’s say the total fee is Rs.10 Lacs. And, currently, your kid is 5 years old. And you want to use this money when you kid reaches 18 years of age.

Keep the inflation rate as 6% and let’s say, so far you have already saved Rs.50,000 towards your kid education.

Putting all these values in the calculator below with the expected rate of return as 9%,

So, you have found that,

• The future value of education will be around Rs.2132928.
• You have to invest Rs. 2850/- per month to achieve your goal.

You can customize these values based on your requirements.

Other dreams for your child

Apart from the higher education, you may have some other dreams like buying a home for your kid, corpus set_up for your kid’s future profession or business or corpus creation for wedding expenses. You need to follow 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

You can 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, will not give loans against shares or mutual funds held in the name of a minor. So, it can be invested in your name. As and when required it can be encashed to meet the necessary expenses for the kid. Banks, generally, will not give loans against shares or mutual funds held in the name of a minor.

Hope this gives you a good starting point for you to create a financial plan for your child’s future. If you want to proceed further in creating a financial plan, you can take advantage of