Financial Planning for your child – Having a baby is not only a matter of great joy for expectant parents, it is also a big responsibility. Financial planning for your child is of utmost importance and should begin as soon as you start planning for a baby.
5 points to keep in mind while Financial Planning for your child/ new baby
Pregnancy is a bitter-sweet experience for expectant parents. It is also one which dents your house-hold budget. It makes sense to be prepared for this roller coaster ride that parenthood is.
Parenthood is a roller-coaster ride. It gives you great highs and is challenging too.
Medical care is extremely expensive these days and it is important to be covered by Insurance. Make sure you have adequate health insurance. If you are covered by your company or by your husband’s company, ensure you understand all the terms and conditions. You should understand the limit of maternity benefit provided by the insurance company, as well as the co-pay limit.
Co-pay means a percentage of expenses which the insured needs to pay themselves. It can be 10% to 20% depending on the insurer.
If you feel the limit provided by employer is not enough, you should take a personal health insurance. You can take a floating policy which will cover your entire family, hence your baby will also be covered as soon as s/he is born.
If you are working, maternity will be big change in your life. You should get to know your company’s policy regarding maternity. Most companies in India provide 3 months maternity leave. Some also have the facility to extend it till 6 months.
You should find out all the details, as well as the possibility of getting leave without pay if needed.
Decision to dis/continue working
If you are working, you will have to consider if you want to continue working post-delivery or not. If you decide to stay at home for some time, you should consider the impact on your house-hold budget.
Day-care / Creche / Nanny expense
If you decide to continue working after your baby’s arrival, day-care or creche expense will be a very big expense. If you have someone, your mother or mother-in-law , who can come and stay with you and take care of the baby for an extended period and you are comfortable with the idea of having them over , you might save on this expense, but you might still want to have domestic help for a longer time.
Many companies run their own day-care centers for their employees. If your company has this facility , you can utilise it. If your company has tie-ups with day-care chains, you might get some discount on monthly charge.
Make a baby fund to save for future
Start putting money away for the baby as soon as you come to know of your baby’s arrival. This will ensure you don’t feel the pinch of extra expenditure on your budget.
There are many ways of doing this. You can create PPF account for your bundle of joy or invest in an SIP in an equity fund. You can also save for long-term goals such as child’s college education and marriage.
Whether you are a mother or father, make it a point to know of the various avenues available for saving for your child based on your investment profile. Do not just rely on advice of neighbors or relatives. Your friend might have the risk appetite to invest in equity while you might prefer some safe avenue like FDs or PPF.
Ensure that you have the knowledge of all the investments being made in your child’s name.
Keep abreast of the new policies floated by government for children welfare. For example, the government has launched the sukanya samriddhi scheme for parents of girls below 10 years of age.