Bringing a new life into the world comes with a lot more responsibilities as well as financial liabilities. When it comes to securing their child’s future, parents need to plan everything out in advance.
A child will have both short- and long-term expenses. Know that you will need money to take care of your child for the next 20-25 years. For long-term needs such as higher education and marriage, invest in equity through mutual funds. If you are comfortable with direct equities, go for it. For a long-term goal of say over 10 years, look for an asset allocation with at least 70-80% in equity, depending on your risk appetite. Besides equity, look to invest in risk-free lock-in products. For instance, opt for public provident fund. While you plan for the long-term goal, you will also be paying towards short-term needs such as school fees, coaching classes or other activities.
For short-term needs, look at investing in products such as debt funds or fixed deposits (FDs). If you are in the lower tax bracket, FD can work for you. You can use these funds for your child’s annual educational expenses.
Don’t ignore Your Goals
Your child’s financial needs are only one of the many financial goals you have in your life. Don’t ignore your financial needs. For instance, many parents don’t plan for their retirement and end up spending all the money on their child. If you fall short of money for your child, don’t dip into your retirement kitty. Make sure you always have sufficient money for your future needs while you work on your child’s plans.
