At any phase of your life, having a well-thought-out financial plan is the key to accumulating and creating wealth. The need for a financial plan increases, even more, when you become a father.
T Rowe Price’s 13th Annual Parents, Kids and Money Survey by Global investment firm revealed that 41% of parents said they did not like to talk about finances with their children, largely (56%) because they felt their kids were ‘too young to understand. Surprisingly, 63% of respondents in the same survey said they learned about money from their parents.
To a kid, a parent can start by teaching them about savings, teach them budgeting and keep the conversation going. Give your child an allowance and track how they are spending it. Offer them a small incentive if they save. Make it a part of their routine so that you can lay a foundation for their bright future.
At any phase of your life, having a well-thought-out financial plan is the key to accumulating and creating wealth. The need for a financial plan increases, even more, when you become a father. Building your child’s future, brick by brick, and fulfilling his present and future needs become your life’s purpose. Your budgets and expenses will go through massive shuffles as numerous expenses relating to the baby’s needs will be added.
It is always advisable to secure favourable certainties in life. As a father, you also need to account for contingencies that will shield your children from financial woes, whether you are around or not. To cover these short-term as well as long-term needs of your family, starting financial planning as early as possible is of utmost importance as a parent.
As a father, don’t look at the pre-natal and post-natal expenses as the most important expenses. Consider it in terms of milestones like education, health, and marriage. Divide your goals into short-term, mid-term, and long-term goals. The short-term expenses will include expenses like post-natal expenses, school fees, and extracurricular expenses. The mid-term expenses would include graduation and post-graduation expenses. The long-term expenses would include health expenses or marriage expenses.
To ensure you are comfortably able to meet these monetary goals, budget every month and stick to it. Life is unpredictable and additional expenses can crop up at any time. Hence, it’s wise to be cognizant that your deviation does not exceed 10%.
Invest to Match Your Child’s Educational Needs
If you are a parent, the biggest priority in your life is securing your child’s future. Especially in Indian families, it is ingrained in the children’s minds that education is a gift that will take you places. It is natural for you as a father to want the best opportunities and the best education for your kids. However, the costs are always a major concern. In recent decades, since the education costs have been skyrocketing, parents have had to shell out a large portion of their savings to provide their children with the right opportunities.
However, by working on a savings plan early, you can reduce the burden of high debt and pay for your education. Time and consistency can be your greatest allies if you choose to spend them wisely. Choosing an algorithmically accurate investment plan with a mix of low-risk investments like insurance and government bonds, and high-growth investments like equities is crucial. The sooner you start, the better.
Life Insurance for Your Child
The biggest reason why you should invest in life insurance is to have enough coverage for your child if he or she develops any health problems. Insurance also offers additional riders that allow you to purchase more coverage in the future without having to go through a medical screening.
A portion of the policy also goes towards building a cash value. Selecting the right insurance plan that meets your present and future needs will provide more room to build an investment. This cash value can be accessed for any reason thus ensuring you have sufficient funds for future eventualities.
Save And Teach Your Kids How to Save
Saving money is one of the most important aspects of securing a financial foundation and building wealth. Yet, most of us realize the importance of it through trial and error as we grow up. By teaching kids the importance of saving and investing, we can empower the next generation and ensure they are monetarily guided.
A lot of credit unions and banks offer children’s savings accounts. Parents can co-own these accounts and it can be a valuable tool. Rather than a cash allowance, you can set up a recurring allowance transfer. This can allow the child to take on a more active role in managing their money while earning interest as well. As parents remain co-owners of these accounts, they can help them oversee the activities and offer money management tips as needed.
So, note down your financial goals and draft your financial plan today which will be the onset of a gleaming future ahead.
By, Praveen Menon, Chief People Officer, IndiaFirst Life Insurance