Financial Planning For A Couple With Children

Children are the greatest gift in one’s life and instill a sense of responsibility. One’s child has dreams and aspirations. These dreams and aspirations become one’s own dreams and aspirations. If one has any unfulfilled dreams in life he sees his children complete them. One’s child might want to be a doctor or a pilot and the job of the parent is to ensure its success. Would one want to see his child’s dreams be castles built in the air for lack of money? No definitely not. In these inflationary times children’s education and marriage costs have hit the stratosphere .A dreaded thought comes to mind. What if one is not around to meet the higher education and marriage expenses of his children? Remember whatever excuses you may have for not buying life insurance now will only sound ridiculous to your widow.

How is financial planning done if one has a young child?

Financial planning is all about ones risk tolerance. Risk tolerance depends on age and what stage of life one is in. One does not expect a 60 year old to go white water rafting or sky diving. This is a game for the youth. In a similar way maximum risk in risky investments is borne when one is young. When one is married and his children are young he takes risks by investing in equity mainly equity diversified mutual funds which give high returns beating inflation. Risk is minimized to an extent owing to diversification benefits. If one’s child is young say around 3 years of age the time horizon would be 15 years where funds would be required for his higher education or a daughter’s marriage. Investing in equities with a long term outlook especially if one has time in hand lead to a huge corpus. This gives sufficient time for one to enjoy the benefits of compounding. However remember to keep one’s spouse in the investment loop. Any investment decision post marriage needs to be a joint decision. This fixed responsibility on the couple. There is no scope for the blame game.

The need for child insurance in ones financial plan

One of the most common insurance plans which can be taken to secure one’s child’s future is the children’s endowment plan. One of the unique benefits of a children’s endowment plan is it has both protection mainly a death benefit as well as an investment benefit. If one dies before the maturity of the plan or when ones child is still young the sum assured is paid up by the insurance Company. If one is still alive when the policy matures the sum assured is paid out along with a maturity bonus at that point in time. These policies also have a with profits plan where a periodic bonus is paid out which enhances returns from these plans.

What is unique about child endowment insurance plans not present in other insurance products?

One must opt for a waiver of premium rider in the child endowment insurance plan. In an ordinary child endowment plan one pays the premium amounts and obtains a sum of money called maturity amount at the end of the policy term. If one were to die before the maturity of the policy the sum assured as well as any bonus accrued till then would be paid immediately. So what is special about a child endowment plan with a waiver of premium rider?

The need for financial planning to save for one’s daughter’s marriage:

There is a famous saying planning is about bringing the future into the present so that you can do something about it now. Ones daughters’ marriage and sons education is in one and his spouse’s own hands. Realizing this is a thought which is the seed of action. A financial plan is that thought which stimulates action.