How to Financially Prepare For a Baby?
Becoming a new parent is truly a rewarding experience but at the same time comes with a thousand new responsibilities. From your changing sleep cycles to taking care of the feeding times or routine vaccinations, becoming new parents is one of the most life-changing experiences for a couple. You’re not only responsible for yourself anymore, but also for the new member of your family, hence to plan for your child’s future well is of utmost importance.
New parents would often have a question in their minds, “What needs to be done in order to be prepared for the new changes?” Well, the answer to this is having a plan. Plan the life your children deserve, the life they want and the life you want them to have. Most new parents fail to understand the importance of having adequate finances before it becomes too complicated. Ideally, financial planning should begin the moment you plan to have a baby; saving and investing should begin from the first day. But don’t fret if you couldn’t do it from the start!
To kickstart Financial planning for your child’s future, you can start with buying an exclusive piggy bank for him/her. Until the child is old enough to understand savings as a habit, you can start depositing money he/she receives as gifts or favours from his elders/ relatives or near and dear in this piggy bank. On a periodic basis, the corpus created in this piggy bank can be invested along with a voluntary amount of your choice that you wish to set apart for your child future goals.
Additionally, as you must have observed, children learn and understand by your actions or by what you do more than by your words. This habit of saving money in piggy bank will go a long way in their lifetime to inculcate the very habit of saving money for a rainy day.
Financial Planning For Child –
These are few small steps which can create a big difference in your child’s future.
- Establishing goals
Finances rise right after having a baby, it’s best to have short-term as well as long-term goals set. From first ceremonies, functions to basic child-care expenses for your child, short-term goals rise your financial expenditure by at least 4-5%. On the other hand, long-term goals are one of the most crucial to plan ahead; they include higher education, their lifestyles, and their marriage.
Plan your goals and start investing accordingly to the time horizon of the goal.
- Build an emergency fund
When you become a new parent, there are a lot of expenses that you need to take care of, and it is always suggested to have an emergency fund in order to deal with unexpected expenses. These expenses may rise due to various reasons – be it unemployment of a parent, or unavoidable medical expenditure. The emergency fund should be enough to sustain your family’s living expenses for at least 6-12 months. Calculate the basic amount required by your new family each month, and keep saving up according to that. You can start investing in a liquid fund or ultra short duration fund, which will give you at least 7-8% returns.
- Get an Insurance
As soon as you have a baby, it is mandatory to get insurance. Many new parents fail to understand its importance until they have to face unexpected situations. A life insurance will cover the expenses of your growing family and protect your family when needed in worst-case scenarios. If you have individual health plans, consider getting a cost-effective Medical Insurance that will cover your entire family (including the baby).
- Invest wisely
Before you consider getting insurance or an investment plan, take aspects like inflation rate, premium rate, cost of future education, medical costs, etc. into consideration. Analyse the available investment plans in terms of returns, their future benefits, pros and cons. Each goal has an individual expense required; for example, short-term goals like schooling for children require an average minimum of Rs. 3 Lakhs per annum in 2019, long-term goals like marriage would require over Rs. 30-40 lakhs typically. You can invest in debt funds for goals that are 3-4 years away, while for long-term goals, investing in equity is suggested.Other than debt and equity funds, SIP is the best way to invest your money. To give you a brief, SIP stands for Systematic Investment Planning and is the smartest way to reach your financial goals. You can start small, with a minimum amount of Rs. 2000 per month and watch how your money keeps growing over the years. To give you an estimate, Rs. 3000 invested per month today would give you Rs. 1.15 crores in the next 26 years.* SIP is considered a blessing for investors!
So what are you waiting for ? Plan for your Child’s bright future with our financial experts at Arihant today and meet your desired financial goals efficiently! Contact us today: +91-7869957509 to know more. Financial Planning