With all the joy and anticipation that comes with starting a family, having a child also marks one of the most substantial financial changes in parents’ lives. Your sense of responsibility increases and your priorities change.
Along these lines, your spending habits, as well as investments, need to reflect these changes. Especially given the current economic scenario of an uncertain economy, high unemployment and lesser job stability; proper financial planning to save for retirement, cover healthcare costs as well as to ensure a secured financial future for your family is very critical.
One of the main aspects of investments that you need to take care of is that even if something happens to you, your family should be financially sound enough to move ahead in their lives with the same lifestyle that you have provided them.
1. Be Sure to Save
Given the expenses a young family faces, the idea of saving may seem impossible. But it’s essential to get into this habit early, to have a source of cash to fall back on in emergencies. Setting aside three to six month’s living expenses is always a good idea.
So, every month, make sure to keep a small percentage of your paycheck, say 2 to 5 percent in a separate saving account which will serve as the fund in case of emergency and you won’t have to touch your fixed deposits and other investments.
2. Protection First
The next step in establishing your financial security is to confront the life’s uncertainty. A term policy can provide your loved ones the resources to maintain their lifestyle after your demise. For an individual who is about to start a family, a term policy may not seem to be a priority, but there are many convincing reasons to put term insurance on the top of the priority list.
First, unlike investment-based insurance plans, a term policy is a pure life insurance plan which provides high coverage at an affordable price. Thus, with payment of a small amount of premium, you get a relatively higher sum assured, which can be planned as per your needs and goals- child’s education, marriage of the children, and other requirements of your family.
Moreover, with a term policy, you do not have to worry about the increasing premium like in other insurance policies. The amount that you have started paying will stay intact for the entire term. Additionally, you also get tax rebates under Section 80C.
3. Plan for Healthcare Expenses
No matter how much you procrastinate it, health insurance is the most crucial part of your financial planning. Because the steep increase in healthcare cost may constrain you to deprive yourself of quality healthcare. However, having a health insurance plan, especially critical illness cover, can protect you from the entire spectrum of critical ailments by making treatment affordable and also enabling you to gain tax benefits.
4. Invest for the Future
If you haven’t already, you should immediately start investing towards your future. Following are a few investment options:
- Mutual Funds
This is one of the best investment options for wealth creation. You can start as low as Rs.500 per month under SIPs and plan your investments according to your needs. Say if you want to buy a car, SIP with Rs 5000 per month for a couple of years will save enough money for the down payment of a good car.
- Unit Linked Insurance Plans (ULIPs)
ULIPs are market-linked products combining the very best of two – insurance and investments into one. Depending on your investment objective, you can invest in objective-specific ULIPs such as pension plans, child plans etc., which have the potential to ensure wealth creation at maturity. Moreover, you can invest in a fund of your choice- equity, debt or balanced fund, based on your risk appetite.
- Real Estate:
In the last couple of decades, the price of real estate has gone up to a level which no one has ever expected. Investing in real estate will definitely do well for you in the long run, but you must keep in mind that it’s also an unstable option. If the market crashes, you will have to hold your investment or sell it at a loss in case you need money.
While you plan to start a family, working on your finances is crucial so that when the time comes, you have funds to fall back on. Moreover, with planned investments, in the event of unforeseen circumstances, your family will not face any financial crisis.