Plan Your Finances to Give Your Child the Freedom to Dream

Anisha Arora | March 20, 2019, 2:18 p.m.

Picture this - 

You are happily married and have a beautiful 6-year-old daughter. Her twinkling eyes and sweet laugh makes you wish that you too could go back to your childhood days. 

One day, while watching TV, she innocently utters “ Papa, I want to go on the Moon when I grow up”. This makes you realise how fearless and enthusiastic she is. 

You are happy to learn about her dreams and aspiration. And like every father you want to ensure that nothing comes in your way for providing whatever your daughter wishes for. But then this question ponders in your mind - “Am I financially secure enough to give my child the freedom to dream?” 

Don't fret; you are not alone!

This worry scares most parents today, especially, when they envision a bright future for their children. However, instead of stressing, parents need to take right financial steps at the earliest. After all, a good financial foundation can secure a bright future for your children. 

Know Your Net Worth

Defining your net worth is the first step towards planning a fruitful future for your child. The ideal approach to do this is by creating a list of your assets and liabilities. This will allow you to gain a fresh look at your financial situation. Once you know where you stand in terms of financial stability, find out your attitude towards investing.
 
Understand this: With the rising cost of living in this day and age, just saving money is not enough to meet your children’s aspirations. Though investment in safe instruments like fixed deposits or recurring deposits will assure the safety of returns; there are some more instruments to consider like ELSS and ULIPs. These can generate handsome returns in the long-term and can be effectively used to plan for your child’s goals. 

A Nest Egg for Emergencies

Emergencies like a sudden illness, surprise home repairs or even an unexpected job loss can distress your family’s day-to-day cash flow if you aren’t prepared. While you can’t avoid such emergencies, you can at least have a buffer in the form of an emergency fund to take care of such unexpected events. 

Therefore, create a sufficient emergency fund which is equal to at least three to six months of your household expenses. If this amount seems daunting, start by putting a small amount each week to build up this goal.

Term Insurance is Very, Very Important

The greatest worry for parents is the future of their children when they are not there. Therefore, when it comes to the responsibility towards your children, term plans are no short of a necessity.
 
Under term plans, your beneficiaries are provided with a lump sum amount in the event of your untimely demise. This benefit amount can be utilized to take care of expenses like children’s tuition fees, household expenses, loan repayments etc. 

Thus, a smart approach is to evaluate your protection needs at the earliest and purchase adequate term cover. However, make sure that you are buying a term life insurance plan from a reputable insurer with a good claim settlement ratio. This will ensure that your dependents do not face any hassles at the time of claim. Max Life Insurance has the highest claim settlement ratio amongst all insurance companies - 98.26%.

Minimize or Reduce Debt

One of the best things you can do for your money and your child’s financial future is to pay off all your debt. To start with, focus on your most expensive debts — loans that charge you higher interest and credit card debts. Once all of these are paid off, you can focus on paying off your mortgage (if any). 

It’s wise to put your non-essential goals on the backburner till the mortgage is repaid. And once you repay all your loans, you will have higher savings to deploy towards your child’s future. 

Summing Up

Prudent financial planning can ensure that your child grows up to experience the best of everything. So, to give wings to your child’s dreams, purchase term plan at the earliest. It will effectively meet their financial goals, even in your absence.

Think of your child’s happiness, not just today, ensure it forever!

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