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Child Future Plan

Child Future Plan
September 19, 2024

Table of Content

 

Kids are an important part of every parent's life. While focusing on managing a balance between emotions and practical life, it becomes a difficult task to manage both spending and saving. To make sure your child stays happy and to secure their life, you need to start investing in a child's future plan. Choosing the right plan for our children enables us to reach every milestone of their lives including marriage, education, and other events in life. 

Continue reading this blog to gain detailed information about the different child future plan policies, how to opt for the right plan, and so on.  

Why Is Future Planning Important for Children?

A children future plan is essential to let them move in the right direction with desired goals and financial objectives. By setting goals, teaching financial literacy, and preparing for uncertainties, you can build essential skills among a child to move with ultimate confidence in the future. 

Let us explore more about the importance of future planning in detail below:

  • Helps Children Set Goals and Plan Ahead

By teaching children to set goals and plan, you can foster self-discipline by creating a sense of responsibility. This way children can also learn new things in the future and take suitable actions to achieve the desired goal. Alongside setting goals, children's future plan will let them learn how to prioritise tasks, enhance their problem-solving skills and manage time effectively. This kind of approach will not only boost their self-confidence but will also let them learn to handle critical situations as needed. 

Moreover, by developing these skills at an early age, children learn to face and handle challenges. Thus, a strong sense of self-efficacy is also built up with time. Teaching a child this way to plan for the future, it is possible to instil among them motivation and a sense of purpose. All children at an early age should be taught to move towards their goals and achieve their desired objectives in the coming days.  

  • Teaches Financial Literacy

To teach financial literacy is another step ahead for the future planning of children. Children at an early age should learn how to manage money, set financial goals, and save money for the future. In this way, they can gradually grasp the basic concepts of spending, investing, and budgeting to reach informed financial decision-making in the future. Children with keen knowledge of financial planning are likely to end up making smart financial decisions in the future.

Additionally, familiarising a child with these habits at an early age develops a sense of financial independence and responsibility. Thus, achieving financial stability in the future becomes easier for a child. 

  • Prepares Them for Uncertainties

With proper future planning, children can learn to face uncertainties and solve unexpected challenges. Life is uncertain and thus future planning can help a child prepare for the uncertainties of life. Because of unpredictability in the future, circumstances might change and thus it is essential to keep some alternative strategies. This will thereby help a child to relax and solve problems hassle-free. With anticipation of possible obstacles and considering respective outcomes, a child can be more confident and handle uncertainties with ease. 

Thus, helping them to build problem-solving skills can prepare them to face challenges that might come their way. 

How to Plan Your Children’s Future?

Planning your child's future is crucial to achieve long-term success. With a comprehensive approach, you can guide your child for further development and assist them in reaching their desired potential. Here is a detailed process of planning your children's future: 

  • Start With a Vision

This is the first and foremost step towards securing your child’s future. To provide financial security to your child’s dream, start with a vision to identify their strengths and weaknesses. Outline a vision aligning goals and achievements with their interests. Setting up a clear vision is of utmost importance to figure out the steps needed to achieve the desired goals. 

  • Create a Financial Plan

This is another important step for your child's future plan. From the very beginning, keep emergency funds aside for spending on their health, education, and other needs. Prepare a budget and estimate the future costs of going to school, tuition fees, extracurricular activities, and others. At the same time, review the budget regularly as per your financial situation. To utilise the most of your money, consult with a financial advisor if needed.  

  • Invest in Education

Investing in a child education plan is important to secure the future of your child. Select the right school for your child and encourage them to pursue their passions. Additionally, set up a child education fund separately to meet future expenses that include college, educational courses, or going abroad for further education. Thus, through proper investment in a child education plan, you can secure your child's future and help them acquire the necessary knowledge and skills.

  • Encourage Personal Growth

Encourage personal growth in your child to foster a sense of emotional intelligence. Provide support to the interests of your child, be it through sports, hobbies, or creativity. Teaching kids to face failures as growth opportunities plays an important role in building a growth mindset. Make your child understand that making mistakes is a significant part of their learning. Thus, a child will become more open-minded and will be eager to try out new things. 

  • Set Goals and Track Progress

To ensure your child is on the right path to success, setting goals and tracking its progress is a must. The goals should be specific and measurable to make it easier for the child to achieve personal and financial success and track progress frequently. Encourage your child to think about their academic and professional objectives at different life stages – high school, college, internships, etc, to get a clear vision of their future. 

Benefits of Financial Planning for Your Child’s Future

Financial planning is important to secure the financial future of your child and turn their dreams into reality. Here are the benefits to look into for proper financial planning for your child's future: 

  • Staying Covered for Expenses Toward Primary and Secondary Education

Every parent wants to send their child to reputed schools to receive the best education. The educational expenses for primary and secondary education are quite high. Thus, opting for a child plan will let you save enough and meet the educational expenses as and when required. 

  • Supporting Higher Education

Any child plan comes to use when a child completes school and is ready to pursue higher education. Higher education expenses majorly include travel, boarding, study equipment, and others. Investing in the right child plan will allow your child to pursue their dream career at the institution of their choice. 

Another significant advantage is you can save any amount of money, reinvest, and again save the money to meet other future expenses of your child. 

  • Beating Inflation

While investing for your child, stay prepared for inflation. Follow the rule of thumb to invest in a way that the assured sum of your child's plan remains at least ten times your current salary. This way, it will be possible for you to meet your child's educational expenses in the future. 

  • Supporting Your Children’s Interests/Dreams

Apart from fulfilling your child's educational expenses, make sure to support their interest and dreams. The saved amount during higher education can be utilised now for fulfilling their dreams, be it for starting a new business, investing in pursuing higher education, and others. 

  • Covering Future Expenses Related to Marriage

In recent days, wedding expenses have gone up. Thus, to help parents, most children contribute a significant portion of their earnings. Alongside, parents keep aside the leftover money from the child's plan to meet the high wedding expenses. Thus, as and when your children complete higher education, start investing in short-term investment plans. 

What Are the Best Plans for Children?

It is crucial to choose the best financial plan for your child if you are worried about their future. From education to retirement plans, all these provide a strong financial base for the well-being of your child. 

Let us go through each of the plans below to find out the right one for your child.

  • Education Plans

An education plan is categorised as the best plan for children in terms of being financially prepared for parents and arranging funds to cope with the increased costs of schooling and college. These plans offer tax-free growth which implies the amount you have invested will grow without being subjected to taxes. Thus, parents consider this plan beneficial. 

Even opting for this plan, parents can choose a pre-set maturity amount to meet the educational expenses in the future. This approach helps parents ensure sufficient availability of funds aligning with the rising costs of education. The 529 plan is one of the most popular education plans. 

  • Savings Accounts

Opening a savings account is a low-risk option parents can choose to secure their child's future. You can open a savings account at any bank with a fixed interest rate. With a savings account opening, you can enjoy a comparatively low interest rate when compared with other investment options. Thus, a savings account is an ideal way of keeping your money safe and secure for your child. 

  • Term Life Insurance

At times, term life insurance is overlooked while planning for your child’s future. With term life insurance, you can avail coverage for a particular period ranging between 10 to 30 years, and offers financial protection. Because of its flexibility, you can tailor a life insurance policy to meet your budgetary requirements. Your child even receives financial protection with this policy during different critical stages of life. 

  • Retirement Plans

Parents starting a retirement plan provide a lesson to their children about financial planning beforehand. Retirement plans such as IRAs (Individual Retirement Accounts) and Roth IRAs, are associated with long-term savings of a child. It's always better to start saving at an early age. Saving for post-retirement days might seem early but it creates a significant impact on the financial future of a child in later years. 

Where Should You Invest While Planning Your Child’s Future?

Choosing the right investment option is crucial for bringing stability and growth to your child's future. There are several investment options with advantages and risks involved to let you build a strong financial base for your child in the future. 

Here is a detailed overview of the different investment plans to secure your child’s future:

  • ULIP (Unit Linked Insurance Plan)

ULIP or Unit Linked Insurance Plan is a convenient investment option to secure your child’s future. This plan is a perfect blend of investment and insurance. Thus, being a parent, if you are looking to secure your child’s future financially while also protecting your loved ones during unforeseen circumstances, ULIP will be an ideal option for you. 

With ULIP, you can enjoy a wide range of fund options that include debt, equity, and balanced funds. Moreover, it provides tax benefits under Section 80C and Section 10(10D) of the Income Tax Act1. 

  • Fixed Deposits

If you are a risk-averse individual, investing in fixed deposits will be ideal to yield a guaranteed return on your investment. Both banks and Non-Banking Financial Companies (NBFCs) offer fixed deposits at competitive rates of interest and varying tenures. However, make sure to note that the interest earned on fixed deposits is taxable. Despite this, because of low risk, FDs are a popular choice among parents. 

  • PPF (Public Provident Fund)

If you are concerned with securing your child's financial future, consider investing in the Public Provident Fund (PPF). With PPF, the interest earned will be tax-free and the tax deduction is eligible under Section 80C of the Income Tax Act. The current rate of interest applicable on PPF is 7.1% per annum, compounded annually. 

How to Plan for Your Child’s Education?

Providing the best education to your child is of utmost importance. With proper financial planning beforehand, you can provide your child with the right resources and secure their future. Alongside, to let your child reach desired career goals, be financially prepared. 

Here is an overview of steps to follow for proper planning of your child's education expenses:

  • Plan for Educational Aspirations

It is essential to plan for the education expenses of your child. Your child might aim to be a singer, a doctor, an engineer, a chef, or even choose to pursue the career of their choice. Thus, planning of expenses accordingly is a must after identifying your child's career path. There will be variation in expenses accordingly. 

However, make sure to consider inflation while choosing your child's investment plan. 

  • Inculcate Good Money Habits in Your Kids

After reaching a particular age, it is important to inculcate good money habits in your kids to manage finances efficiently. You should encourage them to set a budget and set financial goals. Alongside, teach them to be independent and self-sufficient. Make them learn the difference between needs and wants to allow them to spend their saved money wisely.

  • Start Early

This is one of the critical factors to consider irrespective of the insurance plan you choose for your child. Make them learn to start investing at an early age. The sooner you invest, the more time you will get the opportunity to grow your money. Thus, with lucrative returns, you can utilise the amount for funding your child's education or other purposes. Alongside, as an early investor, you can invest in small amounts, making it easier throughout. 

  • Assess Your Assets

Before starting to invest, make sure to consider the assets you have already to invest the necessary amount. If needed, prepare a budget to save a significant portion of your monthly income as per the plans set for child education. With proper planning and regular review, you can raise the necessary funds within due time. 

How to Plan for Your Child’s Marriage?

Every parent's dream of make their child's wedding most memorable. For this proper planning is vital. Let's explore the factors to consider to start planning for a child's marriage:

  • Start Early

While planning for your child's marriage, it is always beneficial to start planning early. This is because, with early saving and investing, you can get a long time horizon for meeting the desired goals and build an even bigger corpus. Moreover, you can keep on investing small amounts regularly and enjoy the power of compounding. 

  • Set a Budget

Setting a budget for your child marriage is important. This will allow you to estimate the amount you will be comfortable to spend on this special day. However, the cost of a wedding should not put pressure on the finances of couples. It would be ideal to create a budget considering the catering, photography, lists of guests, venue, and other essential expenses. 

  • Timeline

Set a realistic timeline to avoid running into delays as the big day approaches. The sooner you start your financial planning and investing, the better you can expect returns. Maintain a diversified portfolio to protect yourself from periods of inflation and market fluctuations. Create a detailed schedule of events that includes your wedding ceremony, reception, and others. 

Secure Your Children with Life Insurance

Life insurance is a financial instrument that provides security for your child's future. Only because of a lack of proper life insurance, your child's dreams should not be kept unfulfilled. Being a parent, it's a great responsibility to address your child's needs. Thus, invest in the right child insurance plan today! 

ULIP is the best long-term investment plan for your child to yield high profits with added protection. You can opt for the different investment channels considering your risk appetite. 

Prioritize Goals

Financial planning is of utmost importance for securing your child's future. Thus, to equip your child properly towards a particular goal, parents should cover each individual plan separately with benefits. Moreover, for safeguarding individual goals, parents can also opt for term plans separately. This will raise the chances of achieving each goal. Thus, your goals will be prioritised with proper management of funds and the creation of separate investments. 

Summary

In conclusion, a child savings plan is a well-rounded policy designed to help you build savings for your child's future while providing essential coverage and protection. These plans typically offer various benefits to secure your child's financial well-being. Given the rising costs of quality education, starting to invest in a child savings plan early is a prudent choice. This approach not only prepares your child for their educational journey but also ensures they have the financial support they need for a successful future.

Thus, choosing the right plan for your child offering investment opportunities is important to meet the costs of education in India and abroad. 

FAQs on Child Future Plans

1. What is a child future plan?

A child future plan is an insurance scheme designed specifically for a child to protect their financial needs in the future in their parent’s absence. These plans also comprise an investment component for later use in their marriage, higher education, etc.

2. Which plan is best for the child’s future?

The Public Provident Fund (PPF) scheme is considered best for the child's future where the rates of interest every quarter are declared. Other than this, you can avail a high rate of interest in comparison with a savings account and fixed deposit.

3. How do I start planning for my child?

To start planning for your child, you should set financial goals considering the needs of your child including education and investment options. Prepare a budget and plan out your expenses to build a strong financial foundation for your child.

4. Is it important to plan your child’s future at an early age?

Yes, planning your child’s future at an early age is essential to secure your child’s future financially and to prepare for educational and other expenses beforehand. Alongside, planning early also gives you more time to build a solid financial base and achieve goals in the long term.

5. Which child investment plans are ideal to protect my child’s future?

To protect your child's future, you should look for long-term investment plans to meet the needs of your child with age. With long-term investment plans, you can get sufficient time to experience a rise in returns through the power of compounding. Thus, these plans will be beneficial if you are looking for financial security for your child.

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Child Future Plan

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Disclaimer

  1. Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.
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