Child Insurance Plan

help create a corpus for crucial stages in the child’s life

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Why We Miss Out on Creating Funds for Children

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Creating Funds for ChildrenAsk any parent about their top wish list for their child. The answer invariably will be to offer a sound financial future for the child to strive in.

With rising inflation, the expenditure associated with children has sky rocketed. The fee of even a play school or kindergarten is today running into high numbers leave alone fee for school, college and higher education. Add to it the inflation by the time the child grows up and the money required may be even higher.

Unfortunately not every parent is able to follow a savings plan to ensure the future needs of the child are taken care of. While there are ample investment options, creating a long term financial corpus requires precision in picking the right investment option and then periodic payments to ensure good returns.

Here are some of the common reasons why majority of parents miss out on creating a long term financial corpus for their child even after wishing for it.

Not taking the services of a financial advisor

Majority of Indian parents never take the help of a certified financial advisor to help them draw out a long term financial plan for their child’s needs. A financial advisor can not only help choose the right investment option but can also help by evaluating the financial needs so that all investments are safe, secure and not impact the day to day standard of living for the parents and the immediate family.

The future is far off:

Creating funds for the future is all about financial planning. Investing just Rs. 20,000 per month offering a conservative return of 8% per annum can mean you can save Rs. 9.88 Lakhs in 20 years time. Many parents however do not value the smaller investments made today for a better future. The perception to cross the bridge when we reach that point syndrome is often a factor which derails the long term investment process.

Wrong perception that home savings are good enough

Many times parents believe that their own small savings is good enough for their children. By the time the child turns into an adult they will have created enough savings to cater for the financial needs of the child. What the parents overlook is that with rising inflation the smaller savings that they may be having are eventually losing their purchasing power with each passing year.

For example if a parent saves Rs. 1 Lakhs and park it in a  savings bank account offer a 4 % interest rate for the year, if the annual inflation for the year is 5%, the parent ends up losing money instead of increasing their financial corpus.

Just not finding the time to chalk a financial plan for the child

Although all parents want the best for their child, many parents today are hard pressed for time. There have been cases where parents wanting to devote a financial plan for their child just didn’t manage to spare enough time. As a result either they do not invest in any financial instrument for their child’s future or end up investing too late which does not give the instrument the time to offer expected returns.  As a result either the child’s future is financially vulnerable or the accumulated financial corpus is well short of the actual needs.

Common reasons why parents miss out on creating funds for children

  • Having no long term financial plan
  • Not knowing which investment options to choose
  • No financial discipline for long term investments
  • Focusing only on traditional savings like home savings or savings bank account without catering for inflation.