Investing for the unborn child
Investing for the unborn child is not a luxury but a necessity because you need to be prepared for the additional expenses that will occur as soon as your child is born.
Investing for an unborn child is quite different from investing for newborn babies or minor kids because an unborn child does not legally exist before their birth; hence how can you invest something in their name?
Although unborn children cannot own bank accounts or properties until they arrive in this world, there are provisions in place for parents interested in saving and investing in the child’s welfare.
Why is it necessary to invest in the unborn child?
Children are a bundle of joy that spreads happiness around them even if they are in their mother’s womb and are yet to take their first breath.
In these turbulent times, when inflation is at its peak, and the cost of living is also very high, it is normal for parents to be concerned about the future of their children.
Parents need to discuss beforehand how many children they want and also, most importantly, how many children they can afford to have in this expensive environment.
Other important queries that need to be addressed before planning a family are the costs involved in raising their child, the contribution of each parent, and how they will deal with all the additional expenses successfully.
Children need care and pampering, and it is not only about the love you shower on the unborn child or the baby when it is born but the various related expenses that you have to incur on the materialistic things like food, clothes, and medicines, etc. and education when they join Montessori or play schools or a preschool and so on.
Thus, planning and investing for the unborn child from the word go will help to meet the related expenses and eventually result in a better future.
Investment schemes for an unborn child
1. Opening a savings account
Bank accounts cannot be opened for an unborn child as they are not legally present, but either/both mother and father can do so in their name.
Several banks in India give parents the option to open an account in the name of the father or mother and add the name of the child after birth or later on when the child gets older.
This account acts as a joint account where the adult parent is the account holder who operates in the name of their minor child, who is the secondary account holder.
Parents can encourage their friends and relatives to provide cash gifts instead of typical gifts for the baby during special occasions like the baby shower or the baby registry. The total amount can be later deposited in the account of the child.
This way, all the cash gifts the baby receives in the later years can also be deposited in that account so that it grows and creates a good sum that can be used for either education or any other important buy.
2. Custodial accounts
Parents can set up custodial accounts for the baby under the UTMA account. The funds are controlled by the parent or the operator of the custodial account, and all the related decisions are theirs.
The funds in the UTMA custodial accounts are invested for growth purposes and are generally used for big expenditures like the child’s education. Initial gains in the UTMA account are tax-free, and the subsequent gains are taxable up to a certain limit.
The UGMA account is also a tax-efficient custodial investment account that enables adults to hold assets for their children until they are of age.
As soon as a UGMA account is set up, the adult has to appoint a child beneficiary who becomes the legal owner of every asset invested from that time onwards.
The financial decisions are made by the account’s custodian, who is responsible for managing the account on behalf of the child until they come of age and can handle the account themselves.
3. Trust Funds
Trust funds can be opened for future generations and are considered an excellent investment for the coming babies. Trust funds prove beneficial while planning for future expenses like tuition fees for college or overseas higher education.
Parents are often worried about the financial future of their kids because living life to the fullest is an expensive business. Planning and investing in the unborn child helps to create a nest egg that will keep on growing and bearing fruits year after year.
Consult an expert advisor to get the right plan
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