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The joy of parenthood comes with immense financial responsibilities that need you to revisit your financial goals. New parents must acknowledge the significantly changed ecosystem they have to negotiate as compared to the one their parents lived in. Both professional and educational landscapes have undergone a visible change over time. In today’s world, children are presented with a diverse array of career opportunities. The pursuits of this generation of children call for different financial approaches that have to be tailored to address their specific needs.
Here are some aspects to factor in, for new parents, while making financial decisions:
Redefining financial priorities: The budget will now get dictated by the child’s education, future needs, medical exigencies in addition to existing financial goals.
Creating a safety net: Financial security of children starts to take precedence and financial instruments that offer this, be it a term insurance or others have to be incorporated in the plans.
Providing for future aspirations: Investments have to be skewed to ensure assured returns. Parents must thus look out for mediums of investments that are safe in nature as this would provide the needed safety net for their children. Lower to medium risk investments would prove to be optimum.
Anticipating the unexpected: Parents need to brace for unexpected expenditures and unforeseen circumstances - such as market vagaries, inflation, loss of job, etc - and plan to keep out of debt traps, picking instruments that can keep pace with evolving financial needs.
Repeated revisit of financial plan: As children grow up their choices of education and career evolve, which could redefine their financial needs too. The parents’ financial blueprint has to be reexamined at regular intervals to keep their financial solutions flexible.
While planning for your child’s future one must keep in mind that there is no one-size-fits-all formula. It is a difficult task as it varies from individual to individual. This necessitates parents to explore a diverse array of financial strategies tailored to meet their child's evolving needs at every life stage. Additionally, parents should also impart financial education/literacy to their children. Equipping them with money management skills. The knowledge to make informed financial decisions becomes extremely important.
(The writer is Chief Distribution Officer, Edelweiss Tokio Life Insurance)