As per a recent report by Principal Retirement Advisors, children’s education and marriage (68%) are the two topmost financial goals in India among new-parents followed by buying a house (55%).
There are quite a few things in the world that change your life as significantly and drastically as having your first baby. The very moment you lay eyes on your latest bundle of joy, your priorities tend to shift. The only thing that matters you the most is protecting and caring for your new-born baby. While your first steps towards protecting your baby are likely to be buckling your baby to car-seat while travelling or baby-proofing your entire house, you will also want to make sure that your child is protected financially. It is always smart to include money matters as well in any kind of planning for your child’s future.
As per a recent report by Principal Retirement Advisors, children’s education and marriage (68%) are the two topmost financial goals in India among new-parents followed by buying a house (55%). This is obviously because with the rapidly-growing financial awareness, most parents these days prefer prioritising financial planning to ensure that their child grows up with the best of both worlds. However, there is another side to the story. While new parents are quite excited to plan for their child financial future, they often fail to understand how and where to start, and what all to prioritise.
To help you, here are some productive ideas to create a strong and reliable financial future for your kids.
Consider Taking Life Insurance
As a caring parent, your responsibilities increase dramatically with the arrival of your new born baby. You need to pay for your child’s food, healthcare, education and lifestyle. As the family’s bread-winner, you need to take care of the finances of other family members as well. In case anything happens to you, your life insurance policy is there to cover all the expenses of your family and most importantly, your child till they become financially independent. No wonder, life insurance is a popular financial tool to help safeguard your children’s future. In case you already hold a life insurance policy, revisit the sum assured with the arrival of a child in your life. Being a person with dependents (child and wife), you must consider getting a term insurance that provides large cover for a small premium.
Below are price comparisons of Term Insurance offered by 4 prominent insurers for a 30-year-old male non-smoker residing in a metro city. The total sum assured is Rs 1 crore.
Add Your Child to Your Health Insurance Plan
So now that your family has grown, you must make sure that the cover of your health insurance policy also grows. Do not forget to add your new-born baby to your existing health insurance policy within 60 to 90 days of the delivery. Most health insurance plans in India that cover the maternity cost automatically adds your new baby in the existing plan without any extra premium. Moreover, many of the plans even cover first year vaccination costs of the baby as a part of the health cover. However, in case you haven’t bought a health insurance plan till now, your new-born is a great reason to buy one today.
Here is a competitive analysis of the yearly premium for a health insurance family floater cover of Rs 10 lakh for a Male: 30-year-old, Female: 28-year-old and Son: 1-year-old, residing in a metropolitan city.
Invest in Child Plans
It is best to start investing for your child’s future as early as possible as the benefits of an early start cannot be exaggerated enough when saving for a long-term goal. You can start by investing within 60 to 90 days of your child’s birth so that you can easily amass larger sums that may not be possible for you in later stages of life. As per industry experts, the multiplier effect in the power of investing comes from the investing duration as longer time horizons prove to show higher multiplier effect. Initially, you can start by investing in unit linked child plans and gradually move to de-risk the policy to safer funds before the maturity term. As a parent, it is equally important for you to adopt a well-planned strategy for choosing between short, medium, and long-term funds as and when required.
Here is a competitive analysis of some of the popular Child Plans available in the market offering ensured returns to the customers.
(By Santosh Agarwal, Associate Director and Cluster Head-Life Insurance, Policybazaar.com)