Monthly Archives: November 2018

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Financial Must-Do’s to Prepare for a New Baby

Having a baby is one of life’s magical moments. Parents enter to a whole new phase of life which is exciting as well as nerve-wracking. And beginning of a new chapter in life means there’s so much to prepare for. Right from baby-proofing your home to financially preparing yourself for all the added responsibilities of life, there’s much to take care of! Ideally, planning for a baby in financial terms should start a year, or even two years, beforehand to ensure there is enough money tucked away to cover maternity leave and that other arrangements, such as life insurance, are in place. But not just the time of birth, planning should start at every stage taking into account your expected income, budget, current and additional expenses. Here are few financial must-do’s to prepare for a new baby. Read on.

Check on your finances

First thing first – know where you stand financially before you have a baby. And this formula applies in every stage of life. Knowing your net worth, income, expenses, etc. can help you set budgets and be well prepared for added responsibilities of life. It also means getting your credit reports and paying your bills. It’s crucial to know your finances in and out at all times!

Get debt-free

If you have a lot of debt before you have a baby, there’s a good chance you are going to add to it once you have a baby. So make sure to be debt free with the exception of long term debt like home loan before even planning to get a child in life. Getting your debt under control will give you financial margin in your life so you can focus on the priority and set your future goals accordingly.

Ensure you have Health Insurance and Life Insurance

Medical costs aren’t all that cheap in India and giving birth is no exception. Make sure you invest on a good insurance cover that will cover the cost as much. There could be a discrepancy between the medical bills and your insurance coverage. You should check with your provider as early into your pregnancy as possible to estimate what your bills will be. Once you have the estimation, you can set aside a portion of salary each month to go towards the medical bill. You should also spend on life insurance policy. A good calculation for this is five times your earnings, plus any household debt and college tuition fees.

Emergency Funds are for a reason

Most of us give importance to savings and insurance but there’s a lot of importance attached to emergency funds. We can never be certain about the uncertainties of life, so we might as be well prepared with the backup of emergency fund. You should budget in for savings so that you’re prepared in case there is an emergency. This could help if you or your partner decides to be a stay at home parent, then you have a safety net, or if there’s an emergency, like home repairs, you will have your emergency fund to pay for it.

Start saving for child’s education

Education is expensive, be it in our country or abroad. Although this may seem like a long term goal but as parents you should prepare for it as you enter parenthood. Look for Educational accounts that will have tax advantages, but they may come which certain conditions, such as the funds can only be used for educational purposes. Various plans are available in the market. You have to pick the ones that fit your goals for your child’s education.

Consider opening a Savings Account for your Child

You should open a savings account for your baby. Look for one that has no fees and no balance minimums. You could link it to your checking account so you can watch your child’s savings grow, and automatically transfer funds into it. It’s a healthy practice and your child could use these funds at the right time in his or her life.

 

It can seem like you have a lifetime to prepare for your financial future, and that of your child, but time passes quicker than you realize. So one should act beforehand to reduce stress and ensure a happy and secured financial future of your family!

Thinking about your child financial plan?? Want to know more about financial management. Feel free to write us on contact@sbsfin.com

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5 Tips to SAVE & INVEST for your Child’s EDUCATION & CAREER

What’s the most important duty of parents? Providing good education to the children we would say.
Education opens the doors to everything. Moral values, better upbringing and a secured future! But given the day to day rise of education expense, how often as parents do you think about saving as much and as early for your child’s education? That’s an important question that you need to find an answer to! Be it in India or overseas, education exhibits inflation on a year to year basis with the percent rising from 10 to 12 per cent annually.
This directs to:
Are you saving enough for your child’s future?
Where do you start saving for your child’s education?
How do you plan it all?
Where do you begin?
Let the post help you with all the answers!

Start saving early

Now a mammoth task like this needs early investments. The trick is to give your money the power of compounding. For those of you unaware of the term, it’s the process in which an asset’s earnings are reinvested to generate additional earnings over time. To elaborate, suppose you need a corpus of Rs 50 lakhs say 20 years down the line. The task may be daunting and seem impossible but it’s possible to save this amount with an SIP. Putting certain amount of money regularly in equity fund over a good period can help you with the desired return. That’s the power of compounding. And since the rate of education inflation is so high in India, you need compounding to work for you over a longer period. A delayed start will not only yield a smaller corpus but can also jeopardise your child’s education goals.

Prefer long term investment plans

Since your goal itself is of long term so should be the investment. The best option is to invest in Systematic Investment Plans (SIPs). An SIP is a mere tool that helps one to invest regularly in a mutual fund scheme. It imparts financial discipline and helps realise long term goals. Tax-free bonds, Public Provident Fund (PPF), bank deposits or even child plans offered by insurance companies could be an additional saving option. For instance, investing in PPF is a good option since it gives compounded interest (traditional investment option) where it locks the amount invested for 15 years. Bank deposits are tax inefficient, and if you are in the 30 per cent tax bracket, go for income funds. Instead of being taxed every year for the interest, you will be taxed only at the time of withdrawal. You could also invest in diversified equity funds and even buy stocks if you have the time and required skills.

Consider short term options

Now you may not have planned things in advance and you may have a time horizon of less than five years. In that case, you will have to rely primarily on fixed income instruments, which are likely to offer a lower rate of return. However, these offer guaranteed returns and safety of capital. Much needed given the situation in hand. PPF is a good investment option but not advisable if you need the money within 5 years. Fixed income investments are fairly safe and advisable.

Review the portfolio

Once your investments are done and you have created a portfolio, make sure to review it at least once a year. You should also check whether the amount required for meeting the goal has changed (given the inflation). Next, check whether your portfolio is on track to meet the goal. While monitoring goals from time to time is important, monitoring your portfolio and see whether it is on track to meet your goal isn’t any less important. That way you can figure out whether you need to increase your investment or put your money to the funds working and performing better. Finally, rebalance your portfolio at the end of each year i.e. sell an outperforming asset and invest the proceeds in one that is underperforming.

A dedicated child’s savings account.

It’s very common these days to put an account for your child when he or she is barely 2-3 years old. Savings accounts although carry relatively low interest rates, but they come with multiple benefits the opportunity to teach children about money and savings as they get older, putting a dedicated sum into savings, etc. This savings account, in the child’s name or the parent’s name can supplement the other, more aggressive investing strategies we mentioned above.

With a well-planned savings and investment approach, you will be able to take care of the inflation in education fees and secure your child’s education and future goals.