Last Updated: Sunday, June 25, 2017

Be a Good Parent; Invest in Your Child’s Future

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Watching your little kid play in front of you may make you wish that she stay as this cute little bundle of joy forever. However she grows, you know. And as the proud parents, it is pretty important that you get prepared for it. Well, this also goes for everyone who is married, expecting and to those who are about to be married; get prepared.
If you think that preparation means being just smiling parents who never quarrel in front of children, then you are making a big mistake. There is more to it than what you think. To know most things you can ask your own mom and dad, read parenting books or speak to your married friends.
Among all that, it is important you set your financial background secured. For a bright future for your daughter, it is important that you are financially sound. Therefore start to invest in your child as early as possible.

Places to Invest for Your Child’s Future

Insurance Policy: The first thing about being prepared is to provide security for your child, even if either you or your spouse is gone. The best option is to start an insurance policy in your name and the claims made out in your child’s name. This way you make sure that she gets a chance to make it on her own, even in your absence.
Moreover, these provide tax benefits and no loans can be taken on these policies thus preventing funds from being used for other purposes. Thus it is always wise that you invest in child insurance policies.

ULIPs: Unit Linked Insurance Plans are same as insurance policies except that they provide income too. It is a better option because insurance policies do not provide income but is rather a security measure. However, these ULIPs invest in equity markets to provide income. This makes it a riskier investment than insurance policies.
Because of this double advantage these are more suitable investment options than other forms of fixed savings like NSC, post office savings, bank deposits etc.

Bullions: You may think that this is a traditional form of investment, especially for the girl child. However things are changing. Investing in bullions is also a good strategy to tide over rising prices and as an investment asset. This is mainly due to the growing demand for bullions across the world. Investing small amounts in bullions every year can go a long way in supporting your child when she grows up. Bullions have been steadily rising for many decades now.
You can also try to invest in gold bars and coins instead of jewelry. This will ensure we are not cheated on the money we pay for as in the case of jewelry. This is a risk free investment as gold and silver always will have an intrinsic value. Besides, silver has industrial applications too, increasing its demand world wide.
Real Estate: This is also a value appreciating asset like the bullions. One problem though, is that land or property is hard to buy, considering the huge amount needed to acquire it. However, real estate has the potential to provide a steady flow of income in the form of rent. It can be used as collateral in obtaining huge amounts of loans. Moreover, your children will feel secured growing up as there is a definite way to cover up their future expenses for education and living.
Equities: You can buy stocks in the name of your kids, but remember that investing in shares is highly risky. If you feel like the market will go up then invest long-term in stocks with a good track record. In comparison to stocks, it is always better to invest in mutual funds as your fund manager will know better about the markets than you do. Any way, do not invest your bulk savings into equities for kids, but rather choose to invest 10% to 15% of your income into it. For better earnings over a long term, you can opt for an SIP plan to invest in mutual funds for kids.
There are other savings options where you can invest your money for the future of your child. These include bank deposits, National Saving Certificates (NSC), Post office savings, Public Provident Fund (PPF) etc. Most of these provide you tax savings, even if enrolled in the name of your kids.

Things to Know When You Plan Your Child’s Investments

Before you head out to put your money in every option available, wait for a moment and consider planning your limited resources. Here are some things that help you to make the best out of your limited income.

  • Start Early: Think about the future of your child very early. A good suggestion is to start investing in her future long before you get married. Now don’t get surprised. The earlier a person invests the more income the person gets. With limited income it would be foolish to wait for marriage and birth. Lots of precious time will be wasted if you wait for the right time to start investments. As they say the best time in the world is now. So start investing now and secure your child’s future.
  • Set Goals: We all know that life is unpredictable but a little planning hasn’t hurt any one yet. Even if life turns out different than we expect it is worthwhile you plan ahead for the emergencies that can come later in life. Therefore, when you start investing in your child’s future set goals to build up a corpus within a stipulated time. Plan about your child’s education, and how much she needs at each point of her life. You must also plan and invest for the lifestyle you are planning for her. By setting goals you are actually disciplining yourself in financial matters and securing your child’s future.
  • Compound Investing: Whatever plans you come up with, they are no good if you haven’t factored in the power of compounding. Make sure that most of your income from interests is pooled back into the investments itself. This way your income grows manifold than if you had used up all your interest income.
  • Count Inflation: Every investment plans must factor in inflation. Your money will lose value in the long run because of this. Therefore manage your investments in such a way so as to receive maximum returns above the inflation rate but never compromising on risks.
  • Tax Implication: When planning for your investments you must be aware about the tax laws and how it will affect your investments. There are investment options to by pass taxes. If you are not able to understand the complex world of taxes it is better you hire a tax consultant to get the picture.

When planning for your child’s future use funds that are not needed immediately. Otherwise, you may get tempted to liquidate your investments, thus spoiling all plans and putting your child at risk.
Your child looks up to you for her every need now. Years will pass and she will grow up to face world on her own. Yet she will look up to you at times of crisis for your support and love. Make sure that you are ready then, as you are ready now to pick her up when she starts crying.

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1 comment:

  1. Yeah, I completely agree that we must become good parents and invest in best options for better future of our children. Sometimes it can become really hard to make decisions about investments and this is when you must get help from a certified financial planner in order to find right options.