Simple Steps to Help You Secure Your Child’s Financial Future

Jun 2018 | Team Rubique

Securing your child’s future is one of the essential duties of being a parent. Raising children as well as taking care of their needs and educational requirements puts a cumbersome financial burden on the parents, ranging from putting food on the table to paying for the expensive education. We have shortlisted guidelines and several ways, which would help parents to ensure the financial security of their child’s future.

Start Early

One of the first things to be taken care of while planning for your child’s future is to start very early in life. Apt planning for child protection, security and insurance should begin right from the birth of a child, so that by the time the child reaches a certain age, you have the sources of finance to depend upon. Provident fund, fixed deposits, mutual funds, equities et cetera generate a significant amount of returns and act as life-saving reservoirs of finance for the future.

Identify your Needs and Plan Accordingly

Parents should start early with the identification of the requirements of insurance and security for their child’s future and therefore, choose plans and make decisions accordingly.  They should have an estimate of how much they are going to spend on the child’s higher education and extracurriculars. From that, the parents should profoundly and thoroughly analyze their requirements for protection and insurance plans as well as sources of finance and then choose what suits them the best.

Inculcate the value of money in your children and write down your will

It is quite essential to teach your children about the importance of money and the wisdom in saving that money because after all, what you learn as a child stays with you for a lifetime. Encourage them to save their weekly pocket money and not spend excessively or unnecessarily.

Write down your will without much delay. Mention your plans, the order of distribution of assets and investments and your other desiderata. Make your will simple, comprehensive and easy to understand so that it does not cause conflicts or disputes.

Invest in their Future

As for sound investments playing a role in securing your child’s future, one may wonder about the different options he has. Following are some of the vehicles of investments which would help you in ensuring the stability of your child’s future:

Ø  Mutual Funds

Mutual fund SIPs are a nice option for you if you wish to start investing a small amount of money monthly, have limited knowledge or shortage of time. Mutual fund houses invest your money on your behalf in various sectors like equity, debt, money markets etc and strive to provide you with good returns in the long term. You can start with a monthly SIP investment as low as Rs 500.

Ø  Fixed Deposits

Investing money in a fixed deposit account is one of the safest ways of investment. It is quite effortless to open a fixed deposit account, and the process doesn’t take much time as well. One of the salient features of it is that it ensures a return on investment and the rate of interest is higher than a savings account. Parents can open a fixed deposit account every few years for their child so by the time the child grows up you have a dependable source of finance to meet her higher education expenses.

Ø  Life Insurance

Getting life insurance is an extremely critical part of your child’s or even your own financial plan. Life insurance helps your significant other as well as your children in case of your untimely demise. It will pay your loans, EMIs, hospital bills and all other significant immediate expenses. Typically, life insurance policies allow you to name your family members (children, spouse etc.) as beneficiaries- this will provide adequate financial support for their future requirements even in your absence.  Therefore, it is advised that one of the first things to be done while planning your family’s financial future is to get your life ensured.

Ø  Stocks

Equity investments give a good return on investments in the long term and are a very effective method of investing. Even though they are known to be very volatile and unstable, they are still one of the most used modes of investments in the market. This is because even after the violent fluctuations and uncertainties in the market, equity investments grow in the long term.  Therefore, it might be a good idea to start investing in the stock market for your children. Of course, you need to exercise caution and choose the right stocks for investment.

Ø  PPF

PPF or Public Provident Fund is a long-term investment as well as tax saving plan. PPF investments have a lock-in period of fifteen years and do not mature before that, that is, you cannot withdraw money from that fund before fifteen years, unless on an emergency. PPF accounts come with tax benefits and a high-interest rate upwards of 7% on an investment starting from Rs 500 and up to Rs 1,50,000.  Parents can open a PPF account for their children in their early years so that they have enough financial support by the time they enter colleges for further education.

Ø  Endowment plans/ ULIPs (Unit Linked Insurance Plans)

Endowment plans/ Unit-linked Insurance plans also known as the investment – cum – insurance plans come under the low-cost options for investments. Unit-linked insurance plans provide protective cover and also give the option of investing in various (qualified) modes of investment such as stock market, mutual funds, stocks, fixed deposits et cetera. Since these are integrated plans, investments along with security can be managed under one roof as per the requirements. Parents can get involved in an endowment plan for their children as this is a good option.

Start Today

The youth is the future of not only your family but also of the country. This is the reason perhaps that various financial institutions across India have come up with ingenious ways to secure their life and future. However, we do realize the multiple alternatives can be a bit bewildering for people to understand, which is why our list serves as the initial push you need in the right direction.