Planning for the finances for your differently-abled child is rather complicated. Here a few tips on how to plan and secure your differently-abled child’s finances.
You need to pay extra attention to your little one with special needs. Planning for the finances for your differently-abled child is rather complicated. You’ll have to take into consideration your child’s special education expenses, special care and therapy expenses, daily expenditure and future expenses. Ideally, your financial plan should be able to cover your child’s present and future as well as yours.
Here a few tips on how to plan and secure your differently-abled child’s finances:
Build an Emergency Fund
As a parent of a little one with special needs, you will have to plan for contingencies well in advance. Two costly expenses while bringing up differently-abled children are the yearly fees of a renowned special school and their therapy. Most of your money will be spend on these two things. So, while planning your contingency fund, you need to focus on these expenses.
Usually, it is advised to save at least three to six months of expenses in your emergency fund. But, in this case, we would advise that you set aside a higher amount of money for contingencies. Also, this money should be invested in an instrument that provides high liquidity because it is necessary to have a steady cash flow when there is a need.
What you can do? You can park your contingency funds in a savings account, a sweep-in account, a Fixed Deposit or in liquid funds.
Additional Reading: Emergency Funds to the Rescue!
Budget
Having a child with special needs requires you to practise good financial discipline. If you take inflation into account, then you will realise that your living expenses, the therapy cost and the special education cost will also increase soon enough. In addition, you’ll also be bearing extra expenses for medical equipment for your child.
Creating a budget including all these costs if you don’t want to face financial problems later in life. Always remember that you have to start budgeting and investing early if you want to take advantage of the power of compounding.
What you can do? Investing in Mutual Funds via SIP (systematic investment plan) is a good idea. For example, if you invest Rs. 1,500 in SIP every month, you can get almost Rs. 30 lakh at the end of 30 years, provided the rate of interest is 8% constantly.
Build an adequate corpus
Being differently-abled makes it difficult for the concerned person to earn a living by working. So, if your child is differently-abled, you’ll have to build a large enough corpus that can last for his/her lifetime. It wouldn’t be enough to save only for the next 30 years, but you should focus on saving for at least the next 60 years for your child. You should also factor in your retirement while planning your child’s finances. You need to ensure that your little one gets sufficient money after you have retired.
What you can do? It is a good idea to diversify your portfolio. You could opt for Fixed Deposits and other liquid investment options. Since you can’t really predict the future outcome, you’ll need to concentrate more on investments that are easy to liquidate. These investments are easily reachable during contingencies and are low risk instruments.
Sound financial planning
When raising a differently-abled child, your finances need to be planned with foresight. A sound financial plan involves not only allocating your assets, but it also requires you to determine the corpus and the returns you would need.
What can you do? As mentioned before, you should diversify your investments. For starters, you can opt for a single premium endowment Insurance plan and a term Insurance plan with an adequate cover. In addition, you can invest in low-risk Mutual Fund schemes which provide consistent returns. Also, you could set up a trust fund for your child. With a trust fund, you can allocate a certain amount of money which would be provided to your child at specified periods.
Tip: You can avail tax benefits for all expenses related to your child’s medical treatment and rehabilitation under Section 80DD.
Letter of intent
Writing a letter of intent is an important step of your planning process. No one knows your little one as much as you do. If something were to happen to you, you’d need the trustee or the guardian to take care of your child just like you did. And a letter of intent acts as a guide for them. Your letter of intent should include the following information:
- Your child’s medical history, current physicians, present health status.
- Your child’s daily schedule.
- Their favourite activities.
- Their likes and dislikes.
- Details about their education.
- Details about any work/volunteering activities that your child was involved with.
- Contact information of your family members.
You can add any other information (apart from the above) which you believe will be pertinent to your child’s future needs.