As a father, you are responsible for your child, not just physically but emotionally and financially. With medical bills, insurance claims, emergency funds and savings being some of your primary financial obligations, preparing for it will help you navigate your finances better.
For new fathers and father-to-be, it’s a totally different journey, especially this father’s day. The anticipation of parenthood and the process of ensuring a comfortable life for the little one starts right off.
You know that as a father, you are responsible for your child, not just physically but emotionally and financially. With medical bills, insurance claims, emergency funds and savings being some of your primary financial obligations, preparing for it will help you navigate your finances better.
Aalok Bhan, Director and Chief Marketing Officer, Max Life Insurance says, “As a father-to-be or a new dad, it would be ideal to first identify your life goals as well as risk appetite which will enable you to consider the right policy options.” For instance, if your goal is to provide financial protection for your family, then you can opt for term policies. If it is wealth creation in the long-term, then investing money in mutual funds, ULIP is suggested as it has adjustable risk according to your risk appetite and gives you the option to go for high risk, balanced or debt-heavy funds.
Must-haves in a new father’s portfolio
Starting a family and raising children requires adequate research, planning, and prior goal setting to meet all major expenses due to arise.
To start with a few Do’s, first-time fathers must start saving early on to accommodate and budget for the new addition to their family. Bhan says, “Relook at your current financial tools, for example, now would be a good time to expand the sum assured of their life insurance policy to support their spouse and children in case of uncertainties. Fathers can also review the option of a child insurance plan to ensure a healthy financial plan which meets their milestones throughout the years such as education, marriage, etc.”
One can buy an individual cover for the child or even add to the family floater plan. Prasun Sikdar, MD and CEO, ManipalCigna Health Insurance says, “Investing in a children health insurance policy specifically meant for your child will cost you little on a regular basis but the potential benefits you can derive from it, in the long run, are immensely useful. If one is looking for a more comprehensive solution to cover your child, the best option by far would be to opt for a family health insurance plan which doubles up as a children’s health insurance policy. Such plans generally cover anywhere between 4 and 7 members of the family, including children.” Insurers also provide cashless claims, reimbursements and tax benefits through these policies
Additionally, you should also be able to distinguish between a family floater and individual health plans. For instance, a family floater policy, or what is more commonly known as a comprehensive health care plan, provides multiple benefits in terms of the child’s health. Under such policies, value-added benefits like health risk assessment, health-related counseling, and primary consultation with qualified physicians and experts are covered. Critical illnesses are also covered under such comprehensive policies, as is maternity care which forms a big part of expenses related to your child.
Sikdar says, “There are certain criteria you should look for while selecting a comprehensive health policy for the family, including but not limited to – policy offering coverage for your child aged 5 years and upwards, children younger than 5 years should be covered under the policy from the 91st day onwards, policies offering the highest amount of coverage for your child, both treatment and copay wise. Although not applicable in case of children, opt for policies that cover pre-existing conditions.” However, keep in mind that insurance is primarily for protection, and not for savings.
Meanwhile, save for emergencies for 6-9 months worth of monthly expenses first. Anticipate child care expenses in this, such as doctor visits, diaper costs, etc. which most parents miss out on. Satyen Kothari, Founder and CEO, Cube Wealth, says “In parallel to other expenses, plan early for a very long-term investment product since you have about 20-25 years for your newborn to become an adult.” He adds, “Look at an investment horizon of 20 years and into 2-3 high quality aggressive mutual funds. Or if you can afford it, buy equity advisory for 20 years. With time, you have a great shot at amazing compounding of wealth so that your child can start adult life with a huge financial safety net.”
Additionally, experts suggest for a new father, child plans linked to education milestones are a good option. These assure payouts at regular intervals or milestones in a child’s life. In case of any uncertainty, child plans can help in addressing the cost of education and other needs of a growing child.
While those are things to do, experts suggest it is advisable for new fathers to reduce risks basis his tolerance level and rather invest in secure funds with a long-term perspective in mind.
How will it help an individual if he plans from such an early stage in life?
Planning ahead gives fathers an early start in ensuring their loved ones are provided for always. Purchasing a life insurance policy in your early years helps in saving up through reduced annual premium costs. Charting out long-term plans gives individuals room to amend strategies and work towards providing a secure and comfortable future for their families while meeting their life stage requirements.