Do Not Forget To Secure Your Child’s Fin Future Boost your term plan, start building a decent corpus to fund higher edu, marriage

 Building a strong financial future for the family should be one of the prime responsibilities of every working individual. However, the fact is "building a strong financial future is not a one night task. It's a long-term process where you have to build it brick by brick", says Ashish Ramesh Bhave, an independent financial advisor (IFA). Here you need to judge your individual financial needs that may include buying a car and a house, own wedding, vacations, having a child/children, their growing up years, education and marriage, and then having a corpus for your and your spouse's sunset years. It may look like a long process, which indeed it is, but if you are not confident enough you can always approach a good financial planner for help. 

    One of the important aspects of the entire exercise is to secure the financial future of your child. "While planning for a good financial future for your child, you have to consider two things: One is how to create the funds by way of smart investing for their present and future financial needs. And second, creating a very strong risk protection plan to take care of any unfortunate event which may happen in your life," Bhave said. 
    "The most crucial part of your planning, and surprisingly the part which is neglected by most of us, is planning for uncertainty," said Shubhangi G Pai, an IFA. 
    "Life is uncertain, and everyone has to plan for it. In case of an eventuality, we should make sure that the child should not fall short of funds. And that's precisely why we need a pure term life insurance plan," Pai said. 
    Financial planners and advisors say most insurance companies have good terminsurance plans to of fer, and given his or her profile, an individual should buy one so that the future of the family, and that of the child in particular, is secured in case of any eventuality. 
    Besides, financial planning for you child should include providing for primary and secondary education, and then building a corpus for higher education. "To build a financial backup for your children, you need to start investing for them soon after they are born," said Bhave. This brings the power of compounding on your, helping realize dreams. "So, it is important to start without thinking that how large or how small the investment could be," he said. 
    According to Pai, education is one thing that no parent would want to compromise on. The main aim is to make them independent and make sure they have a better future. "As things stand now, completion of graduation is close to being affordable, but it is the postgraduation expenses that will most likely burn a hole in your pocket," Pai said. 
    Pai feels that opening a PPF account in the minor child's name should be at the top of one's priority list. In PPF, you are allowed to invest a maximum of Rs 1 lakh. The term of the investment is 15 years and at the end of the tenure, one has an option to extend the tenure by another five years and that too indefinitely. 
    "At the current rate of interest (8.7% compounded annually), you can expect a corpus of approximately Rs 49 lakh at the end of 20 years. More importantly, the proceeds are tax free," Pai said. 
    When one thinks of children's wedding, one of the first things that would come to the mind is gold. 
    "Though most people opt for physical gold, I would recommend buying Gold Exchange Traded Funds (ETFs) instead. Gold ETFs mean buying gold on paper at the same price which you would pay for the physical form. Which means that you would not have to worry about it being stolen or misplaced? But what if you need physical gold at the time of the marriage? It's simple, sell the ETFs, and use that money to buy the jewellery," Pai said. 
NEXT WEEK 
    We would deal with how one can put a financial plan in place to build a corpus to take care of higher education and marriage of a child.