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If you don't have health and life insurance for your children, your financial preparation isn't complete.

There are extremely genuine times that hit you hard when you have to face the reality of the situation rather than fantasise about what it could be. Similarly, you never know what tomorrow may bring when it comes to the future.

As important as it is to protect your child from the outside world, it is just as crucial to provide financial security in the future. Courtesy of the pandemic has taught us what it means to have a life and constantly live with uncertainty, more so with the covid-19.

Aparna Manvi, age 39, Vice President at Yes Bank, believes it is imperative to plan in advance for your child’s future when it comes to finances. “I come from an old school of thought where I am a bit conservative in investing in equity, but after my daughter was born, I realised that there are good products in the market where one can be sure of good returns,” said Aparna, who is a mother to a five-year-old daughter.

Power of compounding

“In times like these when we are uncertain of almost everything, I believe in prudent financial planning,” said Aparna. She has laid a financial roadmap by investing in the Sukanya Samriddhi scheme, which has given her a good return in the past three years.

She has also made one-time investments in gold bonds and makes regular investments in systematic investment plans (SIPs) to reap the benefit of compounding.

“Clear information on investment avenues for child’s financial planning and their pros and cons are not available in the public domain, so it becomes difficult to choose the right fit for your financial goal,” said Aparna.

Importance of Insurance

Shikhar Dadhich, 38, Solutions Cloud Architect at TCS, a single father to two kids, believes it is crucial to have financial planning in place for you and your kid’s future. “What I understood from life is that it is very uncertain and unpredictable. Being a single parent of two kids, it’s essential to do financial planning, especially for their future and education.

For him, the most important thing is to have a term insurance cover to ensure that in case of any unfortunate event, kids’ future remains secured, at least financially. “I also do have multiple life insurance policies, term insurance policies, and some fixed deposits to take care of future needs and my retirement. I do invest in equity shares to earn short term returns sometimes,” said Shikhar.

In the short term, you plan for your child’s future; you’ll be more prepared at various points in your life. Your child’s schooling, higher education, health care, and even a wedding should be included in the finest plan.

Essential factors

– The earlier you begin investing, the better off you’ll be in the long run, as risky products such as stocks and bonds will provide superior long-term returns. Another advantage of starting your investments early is that you’ll have more time to make adjustments to your portfolio if necessary. Instead of putting money into safe, low-risk fixed-income investments, it’s better to look into higher-yielding alternatives. Starting with a SIP and reaping the rewards of compounding is a smart move.

– Your children’s financial ambitions should be divided into short-term and long-term categories. Expenses that must be paid in the next one-two year, such as school fees or fees for any extracurricular activities for your children, might be included in your short-term financial goals.

-If you don’t have health and life insurance for your children, your financial preparation isn’t complete. Make sure you choose a premium-waiver plan when getting life insurance to safeguard your loved ones and children in the event of an unfortunate incident.

– Early investment in your child’s future can be a long-term investment strategy that lasts for 15-20 years. Long-term investments like this need knowledge of all the terms and conditions, so having an instrument in place that makes it simple to withdraw money for a child’s future needs is a necessity.

– To be on the safe side, designate a nominee for all investments you make on behalf of your child. Nominating a person is sometimes overlooked. Children may have problems if a nomination is overlooked and something awful happens. As a result, consider all your options and choose a trustworthy member of your family to serve as a nominee.