Article by Sherin Dev; Follow me on TwitterFinancial Planning for kids are necessary for parents. It is very easy to say but, not so easy to make practical. Such planning should start at the earliest, immediately the kid born. Requirements like time, investment planning, identifying money sources for investments all are vital part when child financial planning in picture. Goal settings, investments, protecting future life, all are required to complete through proper, fail proof planning. Today, we will have a short discussion on how a parent can plan the finance for their kids. We would certainly start from initial requirements of setting the goal followed by the actions required to achieve the goals. some of the best investment combinations also would be identified and discussed with this topic.
Like any other planning, ‘goal settings’ has ultimate importance into child financial planning. One should well clear about the goals to achieve through planning finance for their kids. This goal can be higher education, marriage or any others. It would be noted properly and the required amount should be decided in advance. When deciding such amounts, inflation adjustments should be considered in a reasonable manner. When planning finance for kids, goals to achieve generally have duration of 18 to 25 years. If a parent required $1 lac today for the higher education for their child, this amount could increase to 7 or 8 lacs after 18 years. Any investments must be chosen by considering these unavoidable facts.
Once have decided the goals and duration, next step is to plan how to achieve that goals. Due to inflation which plays major roles to eat up your money, any making investments that should be able to beat and the money should grow faster than inflation. Considering these facts, right investments should be chosen. I highly recommend approaching a good financial planner to get proper advice on right investments which able to beat inflation and to get right idea on the amount that should be invested in each month to achieve all the goals. The golden rule of ‘starting early’ has higher importance in this context. Start the planning at the first year of your kid born. This would helpful to plan the investments with minimum amount that starting later with high amounts.
A working plan for kids:
Here is a working plan to tune when planning investments for kids:When planning investments for kids, parents always remember or should not avoid their two best friends: High performing large cap mutual funds and Index funds. Both are an advisable investment instruments to build a kids portfolio! Investment on these instruments should start at the earliest immediately after a kid born. Systematic Investment Plan (SIP) is the best option to invest systematically on these instruments. If a parent decided to buy Exchange Traded Fund than Index based mutual funds, buy it in each month using a trading account.If you have knowledge on direct stock investing, buy stocks of very good companies. Use to buy the stocks at the time when stock market is down. In other words, buy stocks when others are panic. Remember, there are possibilities to become a trader if not investing properly. If you are investing in stocks, remember to invest for long term. A term of your goal duration would be fantastic on this.
How to protect a kid from future consequences?
Protecting kids future from consequences does not mean protecting them by insurances. Instead, protect the parents self by taking adequate insurances. This would ensure the kids would be protected from all kind of consequences if happen in the future, especially monitory issues due to the demises of parents.That’s all from my side. This can be a considered as a raw structure for you to tune in a better way for your kids. It is highly helpful to other readers if you could share your thoughts here which helpful to make a perfect plan for their kids.I highly consider each comment under this article as a light to the path of lots of kids.
Image courtesy: Raúl A.