By Satyen Kothari
Being a parent is one of life’s most profound joys. Though any parent worth their salt will agree that it can also be the most unnerving label to wear. No matter who you are, being responsible for raising and shaping a child’s future is a herculean task. In fact, Hercules had three children only one of whom grew up to be a king. If only he had invested wisely for the others!
We, however, can invest smartly and secure our child’s future. I swear by four simple tips that can help aspiring and existing parents alike plan their finances. The best part is these steps aren’t nearly half as complicated as you may expect them to be. Let’s go through them one by one.
Set up an emergency fund
If the year 2020 has made a case for anything, it’s the phrase “Life is unpredictable”. That is why it’s crucial for us as parents to have an emergency fund set up for all of life’s surprises. This is usually the equivalent of 6-12 months worth of living expenses depending on the number of dependents you have. You can invest this money in a liquid mutual fund that offers you higher interest rates and the freedom to withdraw when you need it. This makes sure you are financially prepared for any unexpected life event. This is crucial even if your children have grown up as you will not rely on them for financial aid in sticky situations.
Protect your family
We all know about insurance. There are enough advertisements out there tugging at our emotional strings and begging us to get insured. Despite this we don’t always buy insurance – it’s just something we think we’ll get to “later”. Well, this is one situation in which sooner is definitely better than later. Protect yourself and your children. Get a good term life insurance and a family floater + critical illness plan that covers most health issues. The last thing you want to worry about when a loved one is unwell is money. This is a basic necessity – don’t skip it, don’t delay it – get your family insured.
Save for upcoming expenses
Raising children is perhaps more expensive than it’s ever been before. Everything from baby toys to school books and uniforms costs a liver and an arm. That’s why it’s best to brace yourself for expenses you know will pop up. You can estimate the amount of money you will need for both short-term and medium-term expenses. Then consult a Wealth Coach who can help you build the perfect portfolio.
Invest for long-term expenses
The last and possibly what you’ll need to set aside a sizable chunk of money for are your long-term expenses. You need to start early here to really let compound interest do its magic. This includes things like your child’s college education or even wedding celebrations. You can do this by investing in long-term assets such as mutual funds or purchase high-quality stocks under the guidance of a great advisor.
You can even use the popular SIP (Systematic Investment Plan) route to enjoy the benefits of compounding over the years. And there’s no harm in seeking out help. Consult a Wealth Coach who can help you understand, prioritise and hit your investment goals. This way you won’t feel the bite of any big expenses and will be able to maintain a comfortable lifestyle even after these big expenses. It is best to prepare yourself for these in advance otherwise they can really take a big bite out of your savings.
Those are four key steps I highly recommend to anyone who is a parent or is considering having a child. These are simple financial moves that can take away a lot of stress and help you build the perfect portfolio. After all, parenting should be about the joys of raising your child and seeing them grow into happy adults, not money woes!
(The writer is Founder & CEO, Cube Wealth.)
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