There are no tricks to securing your child’s future financially, only tried and tested ways that are now common knowledge. Whether you’re a new parent or a fairly seasoned one, a little guidance can go a long way to ensure you’re doing it right.
New parent? Congratulations! Not-so-new parent? Congratulations to you too! What you’re about to read will help every type of parent out there. They say you discover a side of you that you never knew existed only after you become a parent.
Hence, it’s safe to say that saving up to secure your child’s future is playing on your mind all the time. And you’re probably worried at how everything around you is getting more expensive by the day.
Additional Reading: 5 Important Personal Finance Lessons To Teach Your Kids
The Basic: Start Early, Invest Regularly.
Consistency is key! You’ve heard this many times, haven’t you? That’s because it’s an open secret. There are no tricks to securing one’s future financially, only tried and tested ways that are now common knowledge. However, a little guidance can go a long way and that’s exactly what we’re here to do.
Additional Reading: A Ten-Pointer Crash Course On Savings
Let’s dive into the good stuff, shall we?
Set Your Goal
Have a clear goal about what you’re saving for. Your child’s higher education? Marriage? A decision taken today will decide your child’s future much later on. Write it all down if you have to. Decide the amount and set a target date. Factor in rising costs and inflation.
When you start saving, don’t be anxious about how much you can put away each month. What’s important is to start somewhere. The amount will take care of itself as you make it a habit. No amount is too small. The journey of a thousand miles begins with a single step, no?
Investing, as with anything in life, benefits from an early start. The earlier you begin planning for retirement, the greater your potential return on investment. Starting early typically lets you take more risks as an investor. More risk means an opportunity for higher returns. If something goes wrong, you have time to recover. Those who begin to invest late in life are often inherently more cautious with how they invest their money. This means low returns.
Risk isn’t a bad thing at all. All you need is time on your side.
Starting early also lets you reap the benefits of compound interest. This is the interest earned on interest. By continuously reinvesting your earnings, you are exponentially increasing your return on investment.
Seasoned investors swear by the benefits of investing early and taking advantage of the potential gains from compound interest.
Additional Reading: Biggest Secret Revealed: How Compounding Helps You Make Money
Be Wise About Your Choices
There are many investment avenues. Each has its own unique characteristics in terms of risk and returns. Equities, Mutual Funds, PPF, gold, Fixed Deposits, etc. – each of them can be used at various stages of your child’s life.
Diversifying your investments will help you balance your risk and manage your finances more prudently. Diversification is just a fancy way of saying, “Don’t put all your eggs in one basket.”
Get our drift?
A Life Insurance cover is a critical component of your financial plan because you can name your child as a beneficiary. You can set your child up for a solid financial future and provide for his/her monetary needs in case of a your untimely demise.
The absence of any parent can make things very difficult, but by buying a life cover, your kid is protected. The insurance money can help pay for your EMIs or other debts. Most importantly, it will cover a big part of your child’s expenses until he/ she comes of age and is capable of earning.
Lead By Example. Yes, It Helps.
The first step you can do to secure your child’s financial future is to be a role model. A good ‘financial upbringing’ can work wonders. This means paying down your debts, saving money, and making sound financial investments. You don’t actually have to share your income and investment information with your children. Just talk about money and why you have a budget and how you work to make money to pay bills instead of buying everything that you want.
Talk to your kids early on about earning and saving money as a way of life and teach them how to have a ‘profitable’ relationship with money.
To Sum Up
Like everything else in life, there are no shortcuts to success. Slow and steady, that’s all there is to it. People don’t plan to fail, they just fail to plan. But you will not fail to plan because you just read some solid stuff. Cool?
You now have enough information to get it all together and give your child the future that he or she deserves.