Creating a secure financial future for your children and dependents is one of the most important aspects of personal financial planning. It is essential to plan ahead and invest in your child’s future. You should start early so that your child has a solid financial foundation that is not debt-ridden when they are ready to pursue higher education, begin a new phase in life or start their own business. You can save money for your child’s future, such as by investing in mutual funds, bonds, stocks, and other financial instruments. Holding physical assets like gold, real-estate like commercial spaces or homes are great avenues to long-term wealth creation.
Financial planning requires investors to plan ahead, set goals, and strategize the best way to achieve these goals. If you plan to give your child a financially secure future, starting early is key to ensuring you take the proper steps. We’ll walk you through creating a secured financial future for your child.
Set Realistic Goals
Setting goals is essential in any planning strategy. You can choose the best route to your destination only if you know where you are headed. Most long-term financial plans fail due to the lack of realistic goals. When planning for your child’s educational journey, consider his abilities and inclinations towards a specific profession. Yes, future diversions and changes in goals are certainly a possibility.
For instance, you have been saving towards the fees for a medical degree (approx. Rs.30 lacs) since your child was in school. When he comes of age, he decides to switch his career choice and pursue an international PG course in the US instead (approx. 20 lacs). Here your timeline for the goal and its financial target will undoubtedly change. But since you began early, you will still be in an excellent position to finance his educational costs. On the flip side, if you were planning on a Bachelor’s Degree (approx. 3lacs) for your child and he decides to go for a medical degree (approx. Rs. 30 lacs), such a drastic shift could take a toll on your finances. Hence setting realistic goals is essential.
Stick to the route
It is easy to get swayed by short-term news and noise. A lucrative investment product that was recently introduced in the market that offers high risk and high returns may sound like a great investment avenue at that point, but is it the right product for your portfolio? It is essential to plan based on your assessment of risk capacity, time horizon, and set goals. Short-term volatility is a given in the financial markets and should be accepted. Most investors get ruffled up when they see their portfolios dip due to short-term fluctuations. They often make a knee-jerk reaction and could even pull out of long-term investments by turning their notional losses into real ones.
When planning for your child’s education, marriage, or future seed-fund corpus, a long-term outlook with consistent investments is a mandate. To achieve these goals, investors should ensure they chalk out a clear roadmap and stick to the plan decided upon with the assistance of a fiduciary.
Know what you do
When you assist your child in planning their future career, you ensure you have all the information required to make an informed decision. Similarly, when planning your investments for your child’s future needs, you must ensure you invest in suitable investment vehicles aligned with your needs. This alignment is dependent on how much corpus is required, the ease of liquidating it, and the timeline to meet the requirement. A mismatch in any of these could put your plan at risk causing financial instabilities in times of need.
Choose a Fiduciary instead!
Financial planning requires an in-depth understanding of financial products and their risks and rewards. If time and knowledge are something you lack when it comes to financial planning, then it is best to seek the assistance of a fiduciary. Avoid planning with random product distributors; they may not necessarily put your interest ahead of their commissions. Choosing a SEBI registered financial advisor can help you prepare a robust financial plan according to your risk appetite, timeline, and goals.
Here are a few quick steps to help you get started on planning:
Identify your child’s future goals and begin preparation with adequate investments that match these goals. Include high costs like tuition fees for education, school trips, investment in technology like laptops, and phones, higher education costs, other products, seed funding for a business, and inheritance.
Prioritize these goals based on time, importance, and value of the goal, which is vital to work towards saving a larger corpus. This ensures you tackle the right goal at the right time.
Save up enough money so that they don’t have to worry about finding funds when they need them. Include and adjust for inflation rate increases and taxation over time when preparing future cost estimates.
Have you begun planning for your child’s financial future?