Plan For Your Childs Requirements Early

Nothing brings more joy to a family than birth of a child. In fact, the excitement and expectations start building up as soon as the pregnancy is confirmed. As expected, adequate precautions are taken about the diet and health of themother-to-be. However, very rarely do we see parents focusing onfinancial implications of this very important event at an early stage. It is estimated that parents spend aroundRs 70 lakh on child from conception to college education. Needless to say, inflation will add to the cost, going forward.The cost can be even more if the child either goes for education abroad or decides to go for a professional course. 

Hence, parents would do well to start planning much before the child is born so as to ensure that they neither face any financial stress nor compromise on any aspect of this very important goal of their lives. Here’s what they need to do.

 

Maternity Insurance 

It is important for every pregnant women to get the bestcare during and after the pregnancy. However, medical facilities and childbirth has become a costly affair. Therefore, it would be prudent to accumulate a large enoughcorpus to take care of expenses during this entire period. One of the options is to a buy a maternity insurance,which is usually provided as an add-on or a rider on health insurance policy. However, thepremium for maternity insurance is higher on account of almost 100 per cent claim ratio. Group insurance policies also offer maternity coverage with a sub-limitof up to Rs50,000, which must to be considered while buying maternity insurance. 

Considering the high premium, it may actually be a wise decision to plan early for covering maternity expenses rather than paying high premium for low coverage under maternity insurance. If one does decide to buy maternity insurance, it must be done at an early stage as there is a waiting period of 2 to 6 years as well as a pre-existing clause. 

Spend carefully during child’s early years 

It is common to see parents spending a lot of money on buying expensive clothes, shoes and toys even at a very early stage of the child. While the urge to see a child wearing fancy clothes and be surrounded by fancy toys is understandable, it is of little importance to babies who grow very fast. Needless to say, parents could use this money for essential expenses like baby food as well as diapers and save some money in the process. 

Similarly, parents spend a lot of money on birthday celebrations even when the child is small. Considering that child can’t appreciate this gesture of the parents at such an young age, it doesnothing more than making the parents happy. This money, if kept aside for an important goal like the child’s education, can reduce the financial burden on parents considerably. 

Follow a goal-based investment approach 

It is evident that putting some moneyaside much before the chid is born goes a long way in building the corpus required to cover initial expenses as well as for future needs. In fact, while doing so, it pays to plan separately for regular expenses and for the lump sum required mainly for education. By following a goal-based approach, it becomes easier to ascertain the time horizon, corpus required and how to invest to achieve that target. One must not forget to consider inflation while setting the target for long-term childrelated goals. 

For example, while planning for the child’s higher education, the rate of inflation should be considered at around 10 percent. Hence, the current cost of Rs50 lakh for education is likely to grow to Rs1.50 crore after 15 years. To achieve this target, a monthly investment of 22,000 has to be made through SIPs in equity funds over the next 15 years. If parents are not in a position to invest the required amount, they must begin with whatever amount they can and make every effort to increase it as early as possible to cover the gap. Besides, investing in efficient investment option such as mutual fund provide flexibility, liquidity, variety, right level of diversification in the portfolio and healthy returns.