Financial Planning for a Child Tips

Financial Planning for a Child Tips

Are you planning a child? Than do you know that you will have to do a financial planning for your child’s future? Well, yes. The economy will advance after 20 years from now and everything will be costly starting from education to marriages, businesses and lifestyle.

And that’s why the day your child born, you should start a financial planning for your child. Here are the few great tips for the financial planning of your child.

1. Start Investing early -

This is the 95% advise that anyone needs to do a successful financial planning for their child’s future. Well, its a simple logic. The earlier you will start, the compound interest will work more in favour of you and you will make a huge wealth for your child. Only a 5 years of difference can make a huge difference in the wealth later on.

Just search this blog for “Articles on Compound interest” or simply search the Google and see that how powerful it is and you will realize the importance of starting early. Ideally you should open a joint account in the name of your child since his/her birth and start investing regularly in it.

2. Invest 100% in Equity for long term -

When we plan to build wealth in the future after a long time horizon say 15-20 years from now, we should go for the asset class which can give us highest returns in the long run. And that asset class is the Equity. So invest 100% of your money in Equity to build a huge wealth for your child.

The simple and easy way to invest in equity is – Equity Diversified Mutual Funds. Simply start investing in 3-4 equity mutual funds having a past record of proven performance via SIP and simply forget it.

3. No Child Future/Education Plans please -

One of the commonest mistake people do is, they invest lots of money in the financial products offered by insurance companies. This is probably because of their lucrative names. Well, don’t invest in any investment schemes offered by the insurance companies. This is because they are very costly and they won’t build much wealth in the long run. Only buy pure term life insurance for your child from insurance company and invest rest of the money in equity only.

4. Consider Inflation -

Most of the people don’t consider the inflation while doing the financial planning. If you need today’s 1 crore after 20 years than at the rate of 7% inflation, it will be 5 crores or above. So consider the inflation first and than start investing.

Thus, keep in mind the above basic things and start EARLY…!!!!