How financial planning helps you in becoming a better parent

The first time you hold your bundle of joy, a natural resolve sets in – “I will give my child the best of everything in life.” And this resolve starts with purchasing the best clothes, branded toys, fancy infant ware, and whatnot. The fact is that these purchases cater more to your excitement of becoming a parent than to the child’s joy.

We know it’s cruel to talk about expenses to a parent with regards to their child. Becoming a parent is one of life’s most precious experiences. But the financial onus of bringing up a child in these times is a profound reality. ‘Wants’ take precedence over ‘needs’ in this era and when it comes to children, it becomes even more difficult to distinguish between the two.

However, ‘the best for the child’ needs to also include preparation for the important milestones of the child’s life – education, skill development, higher studies, marriage and possibly helping him/ her settle well in life.

Financial planning is a must because life comes with its twists and turns. Good financial planning keeps you disciplined with regard to money and prepares you to handle any unexpected financial turmoil that might come up in life. Household expenses increase when a child arrives in the family. There may also be a loss in the family income if one parent decides to stay home to take care of the child.

Plan investment before planning a kid

The best option is to invest, now whether it should be in debt funds, liquid funds, or equity funds that depend on the time horizon of your goal. Pre Plan before planning for a kid:

Many of us already know what our goals and milestones are that need to be achieved. However, there are many initial expenses that need to be taken into consideration before the journey begins from being a bachelor to getting married and finally having a kid. One thing that is sure is consistently saving each month. Many of us might have already even planned for it. As and when we grow in our lives, every stage we live through requires different levels of responsibilities and planning, we all know it by now. So as you and your partner decide you want to plan a baby, you must start an expense kitty at the earliest that will be used for your baby’s expenses. A financial planner would also take into consideration many other factors like inflation, risk tolerance, market conditions, etc.

Build Emergency Fund

This fund should spread across financial instruments that can be liquidated easily. Build an emergency fund – at least 6 months’ worth of living expenses and ideally even more. Keep this fund sacrosanct and keep contributing to it.

Opt for life insurance and health insurance plans. Your life insurance plan(s) should provide adequate coverage i.e. an amount that will help your dependents stay financially secure and comfortable in case you are not around. Your life insurance plan can help enhance protection.

A medical crisis can derail even a sound financial plan. Opt for a health plan considering your family’s health history and make sure that every family member is covered in the plan. Hence investing in a health insurance plan is advisable. Life Insurance and Health Insurance are essential investments and should be made on priority.

Education needs

These emotions of saving your kid from every struggle are evident in most parents and the reason most of them always think is, “My kid should not go through what I had gone through”, isn’t it? Every parent wants their kids to have the best education from the best institutes. This is a factor that any parent can’t skip through i.e. Education.

Education is the most important aspect of a child’s life. It is advisable to choose a school wisely and not get sold to the glamour and glitz of expensive schools. Private schools are burgeoning across the country and education has become a huge business. In India, the public education system is not well developed and hence parents prefer private schools. Extra-curricular activities within the school – camps, trips, competitions, etc., as well as extra classes after school - sports, arts, singing, dancing, drama, extra tuition, etc. Apart from school fees, education expenses also involve enrichment costs. can become a huge overload. Plus, education costs are rising exponentially by the day. So planning wisely for a child’s education is a major task.

Because it’s not said enough that for kids’ education loans can be taken but for retirement, there is no loan. So planning for their career will be the second most important aspect, post your retirement planning. We usually take 10% to 12% as inflation costs rise. So depending on the time horizon one must plan their kid’s educational expenses keeping inflation in mind or know about the factors of options available in the market. A financial planner will always guide you practically keeping the emotions of being a parent aside and sometimes that’s what is needed to be a better parent.

Life’s goals as well as your financial plan need to be revisited at regular intervals to ensure that your planning is on track with real life. These will form the basis of your financial plan. Identify long-term and short-term life goals for yourself and your children. Earnings, savings, and investments need to be aligned to these goals.

There is no such subject that inculcates the habit of financial planning in kids. Financial planners whilst planning aim to educate you to be a good teacher to them about financial planning and ensure financial literacy is given to them from their right age. Hence you cultivate the habit of saving and investing in your kid. Our educational system has limited or no knowledge of finance from an early age.