 | « Back to article | Print this article |
How to secure your child's financial future
Providing a good life to your child needs long-term financial planning.
Be it education or marriage, you need a steady source of income over years to be able to meet with the ever changing needs of your child as s/he grows into an adult.
In this competitive world, everyone dreams of providing the best to their children in terms of education, career choices and freedom to pursue a vocation of his/her preference.
However, routine savings are only enough to meet day-to-day expenses and needs and not fulfill dreams.
Thus, there is a need to plan well in advance for your child's future.
Elizabeth Venkataraman is senior vice-president and head of marketing at Kotak Mahindra Old Mutual Life Insurance
Changing face of savings and investments
The dynamics of planning for your child's future have changed radically over the years. Conventionally tools like fixed deposits, National Saving Certificates, term insurance plans and post office savings have been used to safeguard future financial needs. In the present scenario, these tools stand inadequate due to the following reasons:
- Increasing cost of living in the country
- Lower interest rates on traditional saving instruments
- Higher cost of education due to FDI in the sector and greater competition among schools and colleges
- Rise in the aspirations and ambitions of parents for their children
- Greater options of education in western countries
Among the various investment options available today, life insurance plays an important role in an individual's financial planning exercise. Insurance broadly means financially securing your family/ children when you are not around to take care of their needs. Advanced planning and investments give you the freedom to enjoy life with your children and help them have a better life.
Nowadays there are a variety of insurance plans available to meet various needs. Likewise, a Children's plan works best to secure your child's future financial needs when need arises at a certain age (marriage, education expenses). Unlike regular insurance plans, where money
Is spent or used up, child plans are built to create a special corpus for the child which gets used for his/her dreams and aspirations alone and provides complete security.
Women taking control of financial planning
Women have evolved overtime and are a great contributor to the family income especially in the middle-income groups.
Today working women and even homemakers play an integral part in decision-making and financial planning in the family. Women earn and share responsibilities with their spouses to ensure a higher standard of living for their family.
Thus, it is imperative that women be aware of the different ways to secure their children's future.
A rising rate of divorces and separations also contributes to this cause. Proper knowledge and understanding will help women make the future of their children safe and enriching.
Start planning today
While most parents know that they need to start setting aside money for their children's future needs, very few know or understand the ideal way to go about it.
Financial planning for children is something that takes up a lot of 'worrying' time of parents today. Most parents do not have the requisite knowledge and are confused about where and how to invest.
A few steps as highlighted below will equip them to make better decisions.
1. Identify specific goals for such as marriage, normal educational degree, advanced courses etc.
2. Now consider inflated costs of the above which would include inflation and rising cost of education and living. This is the targeted amount one would need for the desired goal.
3. Choose the term period which would be the period when the child would be in a position to require the money.
4. Thereafter, check with a financial consultant to work out the amount to be invested and the level of protection required.