Plan and make a difference to your child's future

On a beautiful late spring afternoon, 25 years ago, two young men graduated from a college. They were very much alike, these two young men. Both had been better than average students, both were smart and both were filled with ambitious dreams for the future.

Recently, these men returned to their college for their 25th reunion. They were still very much alike. Both were happily married. Both had a kid. And both had gone to work for the same industry and held similar positions in different companies.

But there was a difference. One of these person's kid had completed MS from a reputed university in the USA and the others' kid had completed graduation from a local university.

What made the difference?

Have you ever wondered, as I have, what makes this kind of difference in our kids' career? The obvious answer is: A carefully thought out long-term plan for your kid's future.

As a responsible parent, you would not like to compromise on your child's career regardless of rising cost of education. You need a well-developed investment plan that will allow you to meet all expenses for your child's future.

And here's my bit that will help you plan better for your child's future and make a difference to her/his life.

Ramalingam K, an MBA (Finance) and certified financial planner, is founder and director of Holistic Investment Planners (P) Ltd (http://holisticinvestment.in).

Adding the newborn to your mediclaim policy

If you have an individual mediclaim policy, add the newborn as a member in that policy and get coverage. Do you have an employer-provided mediclaim policy? Then, check if the terms and conditions allow you to add the newborn for coverage.

If it allows, then add the newborn to that policy. If it doesn't allow then take an individual mediclaim policy for your kid.

Increasing your term insurance coverage

You need to check whether the existing insurance coverage is sufficient to support your child's future in case of any mishap. If it is not sufficient then take term insurance policy for the gap.

Ongoing educational expenses

The educational expenses are skyrocketing every year. What your father spent for your college education is what you now need to spend on your child's primary school education. So adequate provision in your monthly budget and a projection for cash flow with reference to school education expenses will be an important exercise for you.

Financial planning for higher education

It is going to be the biggest financial shock for you, if you have not properly planned for your kid's higher education. Don't delay this plan; start it as soon as the arrival of your newborn. Then you will have time on your side.

Assume your kid has completed today his/her schooling. Imagine how much you may need to spend for higher education at today's costs. This cost is going to rise year on year because of inflation. So project this cost with inflation rate for the future. Now you will know how much exactly you may need for higher education in future when you kid is actually completed its schooling.

Other dreams for your child

Apart from higher education, you may have some other dreams like buying a home for your kid, corpus setup for your kid's future profession or business or corpus creation for wedding expenses. You need to follow similar steps mentioned above for these dreams too.

In case you don't have time or knowledge to do this financial planning you can seek assistance from professional financial planners. They will save your time and make sure that you are achieving these financial goals for your kid.

Savings account for your child

You can open a savings account in the name of the minor. Whatever gifts your child receives by way of cheque or cash on the occasions like birthday can be saved there. Also this account can be used to motivate her/him to save from their pocket money.

The other investments that you make for your children's future like mutual funds or shares need not be invested in your kid's name. Banks, generally, will not give loans against shares or mutual funds held in the name of a minor. So, it can be invested in your name. As and when required that investment can be encashed to meet the necessary expenses for your child.