Parents are constantly worried about their children’s future. Every step they take, every book they read, and every penny you save for them contributes towards building a better life for your child when they grow up. And similar to many other financial goals, when saving for a financially secure future for your child, it is best to start early.
The good news is that developing good financial habits early can help you create a healthy financial future for your child. Think of the vital needs of your child a few years down the line. List everything you need to arrange finances, including schooling, higher education, healthcare, and even their wedding. Once you get a ballpark figure of the corpus you need to build – you can begin to plan for it. Calculating backwards can help you determine the monthly amount you need to set aside for your child. We have compiled a list of seven financial practices we should all teach to save our children’s future. Take a look:
Even if you are the one building a savings corpus for your child, it is essential to teach them simple financial lessons from a young age. By the time your child is 18 years old, they will be capable enough to manage their money and start high on the financial ladder. Here are some examples of the lessons you can teach young children:
Once you start saving, you must look for lucrative avenues to invest your money. Start investing early and build a diverse portfolio, even if you save only a tiny amount. It will reduce the risk and maximize the interest your money earns. If you keep up this practice of investing wisely, by the time your child grows up – you will have a sizeable amount to secure their future.
Government and private financial institutions have numerous savings schemes that parents use to build savings for children. Different schemes have different investment plans and maturity periods. Research your options thoroughly and choose the best child savings scheme that fits your finances.
Financing higher education is a big worry among Indian parents. Everyone wants to maximize the opportunities available to their children when they choose a college. But how can you ensure that your monthly savings can outpace the growing inflation? Simple! Invest in a SIP in an equity mutual fund instead of insurance schemes or fixed deposits. The annualized return in a SIP can help you build a large enough corpus so your child is not burdened with student loans when they go to college.
The best savings scheme allows you to divide your financial goals into short-term and long-term goals. Any expense you need to incur within the next two years is a short-term goal. Common short-term expenses include school fees, fees for extracurricular activities, and healthcare. On the other hand, any expense that may arise after five or more years is a long-term goal. It includes university admissions fees, wedding expenditures, or overseas education expenses.
Good investment planning involves investing to secure the future and preparing yourself for contingencies. Protect your children with good health insurance and a term insurance plan. When purchasing life or health insurance, go through all the terms and conditions carefully to ensure that your family has sufficient financial backing in case of unfortunate events.
And last but not least, plan well for your retirement. Right now, your retirement plan may not seem connected to your child’s future, but these two things are strongly related. When it is time for you to retire, your children may be in their early or mid-career phase. They may also be just starting a family. It may not be wise to burden them with your financial needs at this time. Good financial planning will ensure that your child has a secure financial future and that you are also financially independent in retirement.
Investing to build a financially secure future may be the wisest decision you take in your earning years. Whether it is building an emergency fund, investing in your child’s future, securing enough money to purchase a home, or saving for retirement; the best advice is to start investing as early as possible. Spend time exploring the different schemes and avenues for investment and choose the one that fits your affordability while giving you the maximum returns.
Author Bio: Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a digital savings account app that offers a 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken it upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.
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