7 essential steps to secure your newborn child’s financial future

Securing your newborn’s financial future requires careful planning and proactive decision-making. (Image: Freepik)

A child brings happiness and a new experience for parents and the entire family members. As soon as the child is born, we plan to make sure the child remains safe and healthy. However, besides the immediate needs of caring for your little one, it’s important to start planning for the financial future from the very beginning. Economic stability and financial planning play pivotal roles in India in ensuring a comfortable life. Taking proactive steps early on can pave the way for a secure future for your child.

Financial planning is not just crucial for senior citizens or adults. It is as much required for small kids as that secures their future and helps them achieve their small or big goals as they grow old. For parents, it becomes highly important to ensure kids are financially secured. Here are seven essential measures you must consider:

Invest in Education Plan

Education is the cornerstone of a successful future and quality education is expensive. Start by investing in a child education plan or a dedicated education savings scheme. These plans offer financial protection and disciplined savings, ensuring that your child’s educational aspirations are met, regardless of market fluctuations.

Open a Sukanya Samriddhi Account

For parents blessed with a baby girl, the Sukanya Samriddhi Account Scheme is a valuable investment option. Launched by the Government of India, this scheme aims to promote the welfare of the girl child by providing a secure investment option with attractive interest rates and tax benefits. By opening a Sukanya Samriddhi Account, you can accumulate funds for your daughter’s education and marriage, fostering her financial independence and empowerment.

Adhil Shetty, CEO, Bankbazaar.com, says, “Sukanya Samriddhi Yojana offers higher interest rates compared to other savings schemes (currently 8.2%), making it an attractive investment avenue. The interest rates are typically higher than those offered by traditional savings accounts or fixed deposits, ensuring better returns on investment over the long term.”

Invest in Mutual Fund

Mutual funds tailored for children offer a diverse range of investment options, including equity, debt, and balanced funds. By investing in a mutual fund, you can harness the power of compounding over the long term, building a substantial corpus to support your child’s future aspirations, whether it’s higher education, entrepreneurship, or homeownership.

Buy Life Insurance Coverage

As a parent, one of your primary responsibilities is to ensure the financial security of your family, even in your absence. Invest in a comprehensive life insurance policy that provides adequate coverage to meet your family’s needs, including your child’s education, healthcare expenses, and daily living costs. Consider opting for a term insurance plan with a substantial sum assured and critical illness riders for added protection.

Create a Will and Nominate Guardians

Estate planning is often overlooked but is crucial for safeguarding your child’s financial interests in the event of unforeseen circumstances. Draft a clear and legally-binding Will that outlines how your assets will be distributed and appoints guardians for your child’s care and upbringing. Ensure that your Will is regularly updated to reflect any changes in your family’s circumstances or financial situation.

Start an SIP for Long-term Goals

Systematic Investment Plans (SIPs) offer a disciplined approach to wealth creation, allowing you to invest small amounts regularly in mutual funds or other investment instruments. Start an SIP for your child’s long-term goals, such as higher education, marriage, or buying a home. By investing early and consistently, you can harness the power of compounding and accumulate a substantial corpus over time.

Shetty adds, “SIPs provide a structured and efficient means of accumulating wealth over time, making them an ideal investment strategy for securing the future financial well-being of a newly-born child.”

Financial Literacy

In addition to financial planning and investment strategies, it’s essential to impart financial literacy and values to your child from an early age. Teach them the importance of saving, budgeting, and responsible spending. Encourage them to set financial goals and cultivate good money habits.

Securing your newborn’s financial future requires careful planning and proactive decision-making. Start early, stay committed, and watch your child’s dreams unfold with financial security. Without investment planning it may get challenging to meet different financial requirements of your child.