Financial Planning for Children

Financial planning for children is essential to make their future secure and help them achieve more in life. Therefore, it is necessary for parents to be aware of the different phases where financial planning for children is required. Read on to know more about financial planning for children.

Financial Planning for Children

Bringing-up child as a successful and responsible individual is a dream of every parent. Almost every parent sacrifices his or her own desires and wishes to make their child’s future secure. Many parents also face lot of hardships to save money and fulfill their child’s dream. Parents even stop caring about themselves when it comes to the career and future of their child.

However, planning the future of children is incomplete without financial planning for them during each and every stage of their development. Have a quick look at different phases where financial planning is needed for growth, development, better career and better future of children.

Preliminary Financial Planning

A financial planning start even before the child is born. Preliminary financial planning involves financial planning for giving birth to the baby. Such expenses may include hospital bills, medication, IVFs etc. It may include some expenses required for taking care of baby’s health too.

Daycares, Creches and Nannies 

Normally working mothers prefer to take leave from work to take care of their babies for at least 6 months to 1 year. Once the baby becomes older they decide resume work. Therefore, to continue work, mothers need to take services provided by daycares, creches and nannies. Parents need to take care of such expenses also. However, in India many working mothers depend on their mothers or mother-in-laws to care of their babies when they are working.

Admission in Pre-Schools

As the baby grows-up parents need to admit them in pre-schools. It is this time when parents introduce their child to a new world. As such it becomes important for them that they enroll their child in a pre-school which prepares their minds for entering schools for primary education. At the same time they want to ensure that the environment is safe and hygienic. To provide all these facilities to their toddler parents have to spend a good amount of money on the pre-schools too.

School Admissions

Getting educated from a good and reputed school is the first step towards bright future. However, taking admission in good schools is not so easy. Along with the payment of donations of schools, parents also need to spend money on school fees, tuition fees, books, extra-curricular activities etc. Therefore, parents need to plan finances properly for enrolling their apple of eye in good school.

Higher Education

To make sure that child chooses one of the best career options, it becomes mandatory for parents to arrange finances properly for the same. However, these days many insurance companies are providing excellent education plans. 

Such insurance plans ensure parents that financial problems do not become a hurdle for providing appropriate education to the child. Today’s competitive age makes it obligatory for all parents to choose proper plan for their little wonder so that he or she can choose a career option according to his or her desire.

Prospective Life

Many Indian parents also plan for the prospective life of their child. Especially in case of female child, parents are very particular about saving money. This saved money is thus utilised during weddings.

Some Facts and Figures

According to Finance Minister P Chidambaram, today's education system has become a money spinning machine. Education has become a source of making money and profit here in India. The minister says that education should not be a profit earning business. 

According to the minister, higher education after school education of children plays a very important role in the development of the country.

According to him, “When all over the globe, 40 per cent of the school-going students make it to colleges or universities, in India only 11 to 12 per cent of the students make it to the higher education section. This should be changed," he said.

As per recent statistics, education costs are rising at 10% per annum from last couple of years. Ten years back, you could have done an MBA at 1.25 or 1.5 lakhs, but the same will cost more than 4 lakhs today.

If your child is currently 5 years old, and you have estimated the cost of his future education at Rs. 10 lakhs, then the purchasing power of that money will be reduced over the years due to inflation. What you can buy with 10 lakh rupees today cannot be brought a couple of years later with the same amount. The value of 10 lakhs will reduce over the years, so the amount required to be saved is more.

How Financial Planning Can Help Achieve More? 

Here are some of the benefits which can be derived form financial planning for children.

There is availability of funds to supports child’s career goals. Therefore, the biggest hurdle to child’s success is removed with an ease. It brings child closer to what he or she wants to achieve in life. 

With proper financial planning, there is no need of taking educational loans. Educational loans become burden on children at an early age. With such burden, it is difficult for children to focus on studies.

Parents are also relieved from the expenses which they have to incur in future if they do proper planning at present. As such they can also pay attention on how they can fulfill other needs of their child so that the child can achieve more in life. 

With parents’ financial planning comes planning for the future of the child. Since parents and children decide about the future in advance, it is easier for them to cope with stress and tension and as such achievement is guaranteed.

Along with child’s hard work, proper financial planning done by parents act as a base for better future of child.  

Once children get married parents are free from their responsibility. However, a new financial planning begins with the end of financial planning for children. As the couple starts heading towards old age, they have to think about the availability of finance during this stage. But this issue can also be taken care by selecting a proper pension plan. Thus, financial planning has become easier due to the growth and development of insurance sector in India.