Life is never constant but it is full of surprises. A child’s life changes when he goes to school, a youngster’s life changes when he bags his first job, an adult’s life changes when he gets married and a couple’s life changes when they become parents. It is an added responsibility now but none of it compares to the joy the little bundle gives you. You start living for your child, its future and well-being. Being a parent teaches you all the complexities of life and you are willing to protect your child with your blood and sweat. Along with being there for your child always, you need to secure your child’s future financially as well.
What else comes with a child? The birth of your first child is undisputedly the biggest jubilation of your life. But with it comes greater responsibility and bigger expenses. Day to day baby care expenses, medical check-ups, vaccinations, schooling, pocket money, higher education and marriage; all of it needs money. The lifestyle is upgrading and so is the demand of the future generation. So you need to think of not only saving the money but also growing it. Whatever steps you take you need to start early.
Investment moves after the birth of your first child
Term insurance: You should take an additional term insurance plan in your name for the added expenses you will experience after the birth of your first child. No one can replace a parent but if at all something unfortunate happens to you, your life insurance should provide all the necessary expenses. If you think it will cost ₹ 20 lacs for your child’s education, take an additional cover of ₹ 20 lacs for 20 years from the day your child is 1 day old.
Health cover: If you already have a health insurance plan, make sure you add your kid to the policy the moment he/she is born. If you do not have the health insurance yet, you should get the health insurance now and make sure your kid is part of the policy.
Savings Account: In India, child birth is celebrated like a festival and friends and families shower their love and blessings in the form of gift money. That money sometimes gets utilized in the day to day household costs. What you should do is open a savings bank account in your child’s name and deposit all the gift cash you receive on behalf of the kid into that account.
Recurring deposits: From the moment of you start expecting, the money outflow increase, first the medical bills, baby care, food, clothes and then schooling. These look like small added expenses but are actually sum up to a lot. The simplest way to plan for these short term goals is to open a Recurring deposit account in your bank.
Fixed Deposits: This is for long term goals. If you have zero risk appetite open a fixed deposit account in your bank in your child’s name and deposit a lump sum amount for a long period. It will benefit when you need it the most for example your child’s higher studies or marriage.
PPF (Public Provident Fund): This is another risk free long term investment option. It is the safest and most popular tax saving method. A minimum yearly deposit of ₹ 500 is required to open and maintain a PPF account, and a maximum deposit of ₹ 1.5 lacs can be made in a PPF account in any given financial year. It matures in 15 years but the tenure can be extended in blocks of 5 years after maturity.
Gold ETFs: India has been in love with gold since ages. It is an open-ended mutual fund whose units represent physical gold that is 99.5% pure, with each unit representing 1 gram of gold. These units are traded on the stock exchanges like a single stock of a company. Moreover, there is no risk of theft and one need not worry about the storage cost or making charges because such units are held in Demat or paper form.
Invest in Mutual Funds through SIP: If you want greater returns, you are bound to take risks. Invest for longer time frames at least 10-15 years and invest through SIP i.e. systematic investment plans. However, the key here is not the amount invested but the time given. The returns are all depend on the power of compounding. Equity funds have a history of generating 12-15 per cent per annum returns. And SIP is considered to be one of the best ways to average your cost over the long term.
Sukanya Samriddhi Yojana: If you are welcoming a sweet little baby girl into your lives then this scheme is for you. It can be opened from the time of birth till your daughter attains 10 years of age. Minimum of ₹ 1,000 and maximum of ₹ 1.5 lacs can be invested every year. Deposits can be made for 15 years and maturity period of the account would be 21 years from the date of opening the account. It offers full tax benefit under section 80C.
Other investment options include Stocks and ETFs, ULIP Schemes, NSC investments, short term funds and bonds etc. Parents should not make a mistake of withdrawing money from their retirement funds for their child’s needs. Also teach your child the concepts of money and encourage him to save money for his own goals.