The birth of a child is a big event in the life of every parent. Prayers, rituals, blessings and celebrations soon follow to welcome the new member to the family. While you do everything you ensure that your child is healthy and happy, do not forget to take some basic steps to secure your child’s future financially too. Here are some actions parents can take soon after the baby’s arrival:
- Review life cover: With the addition of an extra person, it’s important to review your life cover. This life cover should cover all expenses of the family should something happen to the breadwinner. Increasing your life cover by a minimum of Rs 50 lakhs would be a good move.
- Get baby under health cover: From the moment the child is born, remember to add him/her to your self-bought or employer-provided health plan. If you don’t have health insurance yet, this would be a good time to get one with good cover for the entire family. Some policies cover the newborn’s health expenses at no extra cost if they have also paid for the maternity claim in the same policy. The policy will also cover vaccinations for up to a year.
- Start a recurring deposit: With the prices of pre-schools and schools fees ranging from Rs 50,000 to Rs 2 lakhs a year, it has become imperative to start saving for school fees from when the child is much younger. Two plans that will help you achieve this short term goal, which will start 2-3 years after the child is born, are investing the money in a recurring deposit or investing it in a systematic investment plan in a debt fund. As recurring deposits have a higher interest rate, it is suitable for long term plans.
- Update nominations in various financial products: Whether it is your bank account, fixed deposits, mutual funds or even property, you’ll want to add your child’s name in the list of nominees. Another thing to keep in mind is the will. If your will was already prepared before the birth of your child, remember to update your will with the newborn’s name added in the list of beneficiaries.
- Start a savings bank account: Start a savings account for your child as soon as you can. Most banks allow children to open accounts at a very young age. Over the years, the child will get several financial gifts in the form of cash or savings bond. Make it a rule from the start that any amount- small or big- that is gifted to the child will be deposited in his/her bank account. Thus at the end of 18 years, there will be a sizeable corpus. Investments for the child’ long term goals such as education can be opened through the child’s account itself. That way your volatile decision making will not affect the savings dedicated for your child.
Sushant Mallya, an employee of HSBC, said, “Post my daughter’s birth, there were several aspects of financial planning that I considered. First was including her name as a nominee in all my investments and bank accounts. Second, investing for your child to provide for her education, given the high cost of education these days. In my opinion, these two should be in top priority.”
If these tips are followed, it will make your parenting journey much smoother and put a lot of your finance-related worries to rest. Financial planning to secure your child's future assumes utmost importance once you become a parent.