Milestones to Plan for as Young Parents

Financial planning: A roadmap to fulfilling dreams

A young parent has no definite idea of how the child’s future will shape up. But with proper and strategic planning in place, he/she can ideate tentative goals with future costs and accumulate funds accordingly. Thus, even if the child has other goals when he/she grows up, a fund is ready to support them.

So how do you meticulously structure financial planning for young parents? Experts believe dividing the parenthood into different milestones can help.
 

Financial Milestones for Young Parents

Here’s a guide to setting milestones for smooth financial planning for new parents.
 

Tracing the targets^[1]:

From decent schooling, higher studies, overseas education, or professional courses to a lavish wedding, a substantial corpus is needed to support the child’s journey. Besides, you’ll need to carry on with the regular lifestyle and save for retirement too. Set specific goals to make things easier.
 

Assessment of financial status^[1]:

Calculate monthly household expenditures, outstanding liabilities like loan EMIs, and other spending. Match that to the earnings from your salary, other existing savings, and financial assets to estimate how much you can keep aside for the child’s future.
 

Getting insured^{[1] [2]}:

The foremost step in financial planning for young parents is to ensure that none of your child’s dreams get stalled if you are suddenly no more or not in a state to work due to an accident or a disease. Getting adequate life insurance with additional coverage for critical or terminal illness and accidental or disease-related disabilitycan be worthwhile.
 

Child’s education and marriage^[3]:

One of the important goals in financial planning for new parents is creating the corpus for the little one’s education and marriage. As the fund is targeted towards future goals, it’s crucial to consider the inflation as well. Alongside traditional and guaranteed* savings through PPFs, growing wealth through child education plans, child ULIPs, mutual fund investments, and SIPs may help you reach the target. Start early to benefit from the power of compounding.
 

Emergency fund^[1]:

In this era of uncertainties, it’s always good to save something for the rough weather. Ensuring an emergency fund in financial planning for young parents may help in managing situations like an urgent home repair, a job loss, or a sudden health crisis.
 

Management of debts^[4]:

The lesser the outstanding loans, the smaller the financial burden. Try repaying loans at the earliest opportunity and restraining unnecessary spending on credit cards to manage the debts better. This may enable you to save more for the child.
 

Retirement Fund^[1]:

As parents, supporting your child’s dreams remains your biggest concern. But remember to invest and keep aside funds for your retirement through savings, pension plans, and targeted investments.
 

Conclusion

Financial planning for new parents doesn’t end with setting goals and building a corpus. It’s equally important to keep reviewing^[1] your investment performances and alter them if needed. Keep that in mind while celebrating parent goals!
 

FAQs

1. How to make a financial plan for my family?

Here’s a five-step guide to make a financial plan for your family.

• Set goals
• Plan for targets, monitor, and modify when needed.
• Save and invest
• Pay debts
• Make a retirement fund
   

2. How to be financially prepared for a child?

To be financially prepared for the baby, do the following things^[1]:

• Getting insured can be an option to create a financial cushion for the child
• Build an emergency fund.
• Build a corpus for the child’s education and wedding.
• Manage debts well.
• Build a retirement fund.
  
  

3. How can I save for the child’s future?

There are choices aplenty to build a corpus for the child’s future. Apart from traditional savings, life insurance and investments through child education plans, child ULIPs, mutual funds, and SIPs, PPFs can help.

4. What is a child plan?

A child plan^[5]is a combination of insurance and market-linked investment to financially cushion your child’s future. It pays a death benefit upon the policyholder parent’s death and remains active till policy expiry through the waiver of premium. At the end of the policy term, a maturity benefit is paid in terms of returns from the investment component.
 

5. What is a child education plan?

A child education plan^[6] is a specially curated financial instrument that combines life insurance and investment to support your child’s education. Here, upon payment of premium throughout the policy term, a maturity benefit is paid in a lump sum or pay-outs, which can be utilized for the child’s academic needs.
 

6. Is child plan a good option to purchase?

A child plan may be a worthy choice as unlike traditional insurances, here the policy remains active even after paying a death benefit if you die an untimely death. In case of such unforeseen event, the remaining premiums are waived off, and a maturity benefit is paid in due time.
 

7. Is SIP good for young parents?

Starting early, SIPⁱ[^7] can allow young parents to save a moderate amount in a disciplined way for a long term. Here your preferred amount of investment works through a longer time horizon and may fetch desired returns.
 

8. Which insurance plan is best for a child?

A child-specific plan is designed for future goals. Hence, picking an insurance plan that matches your needs and affordability and is able to beat the inflation may be one of the best choices.
 

9. What should be the financial goal of a parent?
 

The financial goal of a parent should be to support the child’s future needs while keeping funds aside for retirement and emergencies.