Understand the Six Pillars in Child Financial Planning

Post written by Sherin Devassy. Follow me on Twitter Whenever I saw a ‘kid’, my heart starts fill with love and mercy. It may happen to each of you too. If it is our own kid, we even ready to dedicate our whole life for their betterment. Loving parents never forget the requirements to provide maximum goodness to their kid’s life for present and future. I consider, a very special, well planned, perfect financial planning for kids will be the most valuable gift a parent can ever give to their kids. There is nothing than this to secure the life of a kid in each stage of her life. This article specially focused to all new parents to share this idea as well as providing knowledge on six major pillars in child investment planning. Each of these pillars has superior importance.

Pillar#1 : AgeDo you know at what age a financial planning for kids should start? There would be different answers available. But, the most suitable and beautiful time to start your kids financial planning is within the first 3 months of her birth. An early startup ensures to bring excellent results than a later start. Never miss this first pillar, age to start financial planning for kids.

Pillar#2 : Goal

Goal setting have ultimate importance in Kids Financial Planning. The only difference when compare with our financial planning, parents set the goals here on behalf of their kids. This can be anything depends on parents vision on their kids future but, the plan should able to bring the required result or little more than that. When kid reaching to the stage of taking self decisions, she should not feel the planning for her was not sufficient. This point indicates the plan should not cover only the required goals set by parents but should provide enough room for kids to take their decision if required.

Pillar#3 : Duration

Any parent who plans finance for kid gets a right duration of between 18 to 23 years. This can certainly consider as a perfect duration for a kid. At the time of 18, normally a kid ready for higher study and can take advantages from her planning done by parents. When she is at the age of 23, she starts earn money to support parents and family. Parent’s duty generally stops at that point when their kid starts earning after completion of her study by the finance planned by her parents. If parents set a goal more than for study, she can still use that to build a home, marriage or anything that is better for her life.

Pillar#4 : Redundancy

Through applying redundancy to kids financial planning, parents can ensure their kids never suffer from financial issues at their absence. Redundancy protects kids from unexpected financial issues until they become self sufficient. A best example for applying redundancy is subscribing child insurance with waiver options. This option ensures the insurance company pays all the future premiums in case of the death of parent. Intelligent parents take extra term insurance covers to protect the financial future of their kids by adding their kids are the nominee of benefits. When planning kids finance, any investments should be redundant through all available and possible ways to ensure any financial issues never affect your kids.

Pillar#5 : Selection of Portfolio

When coming to investment for kids, prefer maximum investment to best equities or equity related investments. A strong reason for this is, equity investments are the best to produce maximum returns for long run. Equity investments for kids should mix with large, mid and small cap companies selects through good research and study. Visit the investment articles area in this blog for various excellent articles on this. A carefully selected, maximum equity oriented portfolio can do miracles! Remember, goal and duration plays major roles on this part as mentioned below.

Pillar#6 : Monitoring and Balancing

Once done with an error proof portfolio creation, next and final pillar in this is monitoring and balancing of the same. Except some investments like real estate and gold, all other instruments should come under your monitoring radar. Monitoring of instruments performance should do in proper time and without fail. Also, shouldn’t monitor the performance always and or some time too. Instead, it should happen time to time whenever it is required.Carefully selected equities can be the best performers and some time worst too. Identify this error, utilize monitoring skills time to time. Monitoring not only help to throw out bad investments but, also helpful to add new best performers. An example to the same is, once planned a kid investment portfolio at her age of 1, parents can give preference to equity or equity related investments to an 80% or more with a focus of next 10 to 15 years. This portfolio should be monitored once in a year to understand how the included equities are performing. It also required right balancing between investments to get liquidity at the right time. Working in this way, monitoring and balancing can consider as a double edged sword.

If you have not set any financial planning for your loving kid or even kids, this New Year is the best time to set this as a new resolution. Parents can even take help from good financial planners. Wish you all a very happy and prosperous New Year.

Image courtesy: mikebaird