How To Plan For Your Child’s Future With Mutual Funds?

With cost of higher education shooting up, fixed income return options are unlikely to help you save for your child’s future. You need to aim for equity returns.

People usually save either for retirement or with a specific goal in mind. One of the goals is children’s future like education or marriage, while other goals could be to buy a house, car amongst others. This article focuses on the children’s future as a goal.

There are 3 key variables that you broadly need to keep in mind when planning for children:

The amount you may need for the child’s education (and marriage)

Years left to the event

Return expectation to build in

As you can see, there is a vast difference in the monthly amount you need to save, with difference combination of years left, and returns you will earn.

So our first advice to you is to start early. If you start investing for a child when you marry, you may have as many as 20 years ahead of you. But if you start when the child is say 5 or 8 years old, then you could be left with barely 10-12 years. The more the years you have, the less you need to set aside on a monthly basis.

The other critical part is the return your savings are generating. It is common to find parents investing in fixed deposits or Public Provident fund(PPF) to sponsor their children’s education or marriage. While as an investment option it is safer, it also generates paltry returns of 8-9% per annum. While interest on PPF is tax-free, that on fixed deposit is taxable, which pulls down the post-tax returns even further. Given the rate at which cost of higher education is shooting up in the country, debt definitely seems an investment option not worth considering.

As against this, if you try to aim for equity investments, your returns could be between 12-14% per annum, which is the bare minimum returns equity markets show over long periods.

As your approach the last 2-3 years of the child’s educational needs, you can choose to shift the portfolio towards debt, to eliminate any volatility risk – though this would not be a major consideration as the requirement for funds would be spread over a 3-4 year period.

Many parents prefer to open an investing account in the name of the child, in order to isolate the account, accommodate for gifts in the name of the child, and for tax reasons. If you plan to save in the name of the Child Plans. The best investment is in an investment in education".

Source: http://bestsavingsplan.tumblr.com/post/143835066329/how-to-plan-for-your-childs-future-with-mutual

Save for your child's future the safe way

Best Child Insurance Plan

The State Of Savings For Kids Today

Saving For Child

Buying the Best Child Plans

It is natural for parents to wish the best for the child. When it comes to some of the more important milestones in their children’s lives like education, marriage or buying a house, parents do not like to fall short, least of all financially.

Benefits of child plans

This is how child plans can help parents provide a better future to their children:

§  Education – is getting more expensive by the year. Inflation in education probably outscores inflation in every other sphere of life

§  Marriage – an occasion that comes in the lives of your child, so you want to make it as unforgettable as possible

§  House – prices are so high that for many owning a roof over the head is a dream that stays just that. Parents would like to provide their children with a house by contributing at least towards the downpayment.

Child plans can play a role in helping parents realize all this and more.

How child plans work

By setting aside money towards a child plan, parents can amass a significant corpus over a period of time. The money can then fund the aforesaid objectives.

Child plans are available in two variants –

·        traditional or endowment plans which invest in debt investments like government securities (gsecs) and corporate bonds among other options.

·        market-linked or unit-linked plans (ULIPs) which invest in equities

Parents must choose an option that is best suited to their objectives and risk appetite.

Importance of riders

While planning for child’s future, it pays to make a comprehensive plan so as to cover all possibilities. One way to achieve this is through riders.

Simply put, a life insurance rider is an add-on that enhances the cover of the primary plan in case of an event. Among many, here are two riders in particular that can add value to the child plan:

§  Premium waiver 
Most child plans offer premium waiver benefit – either as an option or as an essential feature of the primary plan. The premium waiver is particularly important as in case of the death of the parent, the insurer waives off future premiums while continuing to fund the insurance policy till maturity. This makes sure that the maturity benefit that was set for a certain age remains intact as planned, in addition to the death benefit paid.

§  Accidental death/dismemberment benefit

You can safeguard against accidental death or disabilities arising as a result of accidents, over the term of the child plan.

In case of accidental death/dismemberment, the rider comes into play and pays out an amount, usually equal to the sum assured. The primary child plans continues and will pay out the sum assured on maturity.

Source: http://www.indiainsurance.co/blog/life-insurance/buying-the-best-child-insurance-plan-in-2015/#

Child Plans

Child plans

Child plans

Financial steps to take before you have a child

There’s no greater happiness in the world than the arrival of a new baby. From the moment the child is born, it is difficult for new parents to take their eyes off their little bundle of joy. But a child is also one of the biggest responsibilities the world has ever known. Financial planning for your child is a very important part of this responsibility. This financial planning is built upon certain crucial steps that you need to take before you have a child. We have therefore enlisted 8 financial steps that you must take before you have a child.

1) Get health insurance

There is nothing more important than the health of your new born, and to look after that, both the mother and father should be physically and mentally healthy. Since medical care is quite expensive these days, it is advisable to buy a health insurance policy before you have a baby (if you haven’t bought one already). Check which insurance policies cover maternity benefits. Though no company explicitly offers maternity insurance, certain companies provide benefits like consultation fee cover. Take a policy that covers your baby as well.

2)    Lifestyle changes

Middle Class and Upper Middle Class couples of today are used to living a more than modest lifestyle; but a baby’s entry into their lives changes a lot of things. Your disposable income decreases considerably, and you can no more expect to splurge on certain indulgences the way you did earlier. It is therefore, necessary to start making certain lifestyle changes to cut down on expenses. These expense cuts depend on the kind of lifestyle you live. For example, spending less on clothes and accessories, fewer dinners outdoors, less partying etc.

3) Review insurance

Before you have a baby, you must also review your existing life insurance policies and in case you don’t have a policy, you must buy one immediately. If you have already got a life insurance policy, then you have to check with your agency to ask if they would allow enhancing the cover. If they do not provide this facility, you should buy a new policy soon.

4) Check maternity benefits/ leave provided by the employer

If you are an expecting mother, you need to check your employers’ maternity leave policy and other maternity benefits provided by the company. Most companies offer paid maternity leave for 3 to 6 months. Some companies also offer unpaid sabbatical up to a certain period. You also need to start saving other leaves like sick leave, paid leave, etc. to use for your pre-natal checkups during pregnancy.

5) Stem cell cover

Stem cells can treat various illnesses and lifestyle diseases, and new parents are often encouraged by stem cell banks and doctors to preserve their children’s stem cells. Preserving stem cells becomes important if your family has a history of certain diseases, like Leukaemia. Once you decide to go for it, there are other decisions to make like choosing the right stem cell bank and arranging the money required to meet the cost of preserving the cells, and deciding whether you want to make a onetime payment or opt for monthly installments.

6) Devise a long-term investment strategy

In this Child Plans Having a child is just the start of the biggest responsibility you could ever undertake. The one thing that will be your biggest concern apart from your child’s health is his or her education and career. You may not be unaware of the extremely high cost of education in the country, which includes quality primary education too. Before you have a child, you need to start finding ways to regularly invest small amounts that can be later used to fund your child’s education.

7) Start planning a will

Life is unpredictable and you would certainly not want your child to be left without someone to look after him or her if anything should happen to you.

Financial planning for your child does not have to be as daunting as it seems. With certain right steps (like the ones mentioned above), taken in time, it can happen very smoothly, thus, proving the adage- a stitch in time saves nine.

[Source: https://www.tomorrowmakers.com/articles/financial-planning/8-financial-steps-to-take-before-you-have-a-child]