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How to plan for a child’s future? All you need to know

In the previous article, the discussion was about: how long should you invest in SIP? This article, will try to understand the steps you must take to secure your child’s future, that is, how to plan for a child’s future? 

Your child’s birth is one of the most critical events in your life. Other than celebration, it requires maturity and responsibility for the parents to take up this responsibility and secure their future.  

A plan for the child should cover different phases of a child’s life, including their education, health care and even marriage.

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8 Tips on How to Plan for a Child’s Future

1. Use compounding to your advantage 

A lot of money is involved when a child goes for higher education, which means you have to build a robust corpus for your child.  

Good education. From the child’s birth, there is quite a long time, close to 15-20 years, to when a child reaches the age of higher education. 

So, you can invest in instruments like stocks and mutual funds that will compound your money at a better rate and will leave you with a vast corpus in your time of need.   

2. Starting early and having insurance 

The power of compounding takes time to show its magic, so the most important thing is to start early.  

You must maintain a plan for your child as soon as they are born. There must be a comprehensive insurance policy to consider some unforeseen events.

Insurance policies will also act as a cushion for your investments. Guard you against unwanted events.  

3. Account for inflation

An essential thing that most people miss while planning their investments is to account for inflation or education inflation.

Since you are investing for a very long period, you must take care of the inflation-adjusted returns that you will make. Since inflation is a huge factor that eats up your money, you must take adequate steps. If you consider this factor, you can protect your child’s education fund, marriage fund etc., from being eroded.  

It will help you plan your child’s future better by incorporating the best plans that offer a cushion from the blow of inflation, preventing your savings from eroding.

8 tips to keep in mind on how to plan for a child's future
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4. Goal setting 

Goal setting and prioritizing your goals for the child’s future are very important as they will help you channel your investments.

For example, you must invest in different plans so that you will be able to withdraw your funds at the time of, say, your child’s higher education or at the time of marriage.  

So, keeping in mind the goals and being specific helps a lot while planning for your child. You can also have different; for example, you can take other term plans to safeguard essential goals. 

5. Invest in a high-yielding scheme

Since you have a lot of time to invest from the birth of a child, you can take advantage by investing in high yielding strategies that might come with greater risk and high return potential.  

They have the potential to outperform most other asset classes, and they are considered effective in building a corpus faster.  

You can take this risk since you are investing from a long-term perspective. Still, it is also essential to do proper hedging by purchasing an adequate amount of investments to cushion this aggressive equity investment. 

6. Invest in partial withdrawal plans

As we know that you will require the money at different time points, it is wise to invest in plans that allow you to withdraw cash when you need it because these plans are very helpful during emergencies.  

The ease of withdrawing funds might act as a boon at a time when fulfilling a need for a child’s financial future is more urgent than other things. 

7. Plan for yourself as well

If you want your child to be happy in the future, you must do your retirement planning properly. Parents won’t want their daughter or son to remain worried even after they have settled in their life.  

So, to take care of this factor, you must take adequate steps to secure your retirement.  

8. Review your plan periodically

To keep your plan relevant over the years, you must constantly review it every year or on some decided timeframe to ensure that you do not miss out on any event that might affect your investments.  

Parents who indulge in reviewing and modifying their child’s plans, be it for education or their future settlement or their marriage, are more likely to adjust their investments, savings and strategies by the times and thus maintain the sync. 

Consult an expert advisor to get the right plan for you

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