Common Strategies To Secure Your Newborn Child’s Financial Future

The arrival of a newborn is a memorable event that provides enormous joy and a slew of new experiences to parents and their families. While your primary concern will be your child’s safety and health, it is equally important to consider his/her educational and financial future from the start.

So, here are some of steps you might consider taking to safeguard your child’s financial well-being.

Start Investing As Early As Possible

Many parents hold off their savings and investing plans until their children start primary school, but this may prove to be an expensive error. With rising school education costs, postponing savings could affect your child’s prospects of obtaining a good education. Starting your financial journey as soon as your child is born will allow you to accumulate a large corpus with minimal investment over a long duration by way of power of compounding. Early investing will also offer you adequate time to examine and adjust your investment strategy as necessary.

Invest For Your Child’s Education

Education is the foundation of a bright future, but it is becoming expensive over time. You may consider investing in products, such as equities or equity mutual funds for the higher educational goals of your child. As the investment horizon is long-term, your investment are likely to override the market volatility. But make sure to liquidate your equity investment at least three years prior to the goal and reinvest them in more secure debt instruments, such as fixed deposits to safeguard against volatility. This will ensure that your funds will remain safe for your child’s education at the required time.

Open SSY Account For Girl Child

The Sukanya Samriddhi Yojana (SSY), introduced by the government in 2015 is an ideal investment choice for parents who have a girl child. This scheme supports the wellbeing of girls by providing a secure investment vehicle with competitive interest rates and tax breaks. It offers a deposit rate of 8.2 per cent per annum. The minimum investment in a year is Rs 250 and one can invest up to Rs 1.5 lakh in the scheme in a year. The investment made in a financial year is fully deductible under Section 80C of the Income-tax Act, 1961. SSY has a maturity period of 21 years or until the girl gets married after 18 years (whichever is earlier). Also, parents or the girl’s legal guardians can withdraw 50 per cent of the account balance for the educational expenses of the girl child.

Purchase Health Insurance

While a solid financial strategy is vital, it is also necessary to guarantee that your children is covered by a comprehensive health plan. Good financial planning includes protecting your child’s health and guaranteeing his/her their future in case of unforeseen occurrences. When choosing a health plan, thoroughly review all terms and conditions and assess how they may affect your family’s financial stability.

Diversify Your Investments

Invest in a variety of assets that are geared to your short- and long-term objectives. Consider safe assets that provide liquidity for short-term requirements, such as supporting school activities or a family trip. Focus on growth-oriented assets, such as equities or equity mutual funds for your long-term goals, such as college education, as they can produce better returns over time. Diversify your portfolio depending on time horizon to reduce risk and optimise possible returns to ensure that you have the cash accessible when needed.