When the question comes to safeguard the child’s future the first and only thing that comes to mind is where to save. What instruments are better? What policies to buy? PPF or Sukanya, what to open? Etc.
And this is where the product sellers make a pitch with their structures. And slowly you will find yourself accumulating different products with no direction on how much is required and what this investment will give.
It’s like when a patient goes to a chemist who just sells the medicines and does not bother to diagnose the real problem.
However, When it comes to safeguarding your child’s future, it’s important to do more than simply investing in an insurance or investment plan. Real financial planning involves several steps that go beyond just investments.
Here are a few unusual ways which every doctor should follow to ensure a safe and secure future for their children:
#1 Writing a WILL
Writing a will is crucial, and it’s important to mention the name of the child’s guardian(s) in your absence. If you child is minor it is very important to work on this. Else, court intervention will be needed in case both parents are not alive.
YOUR FINANCIAL DATA
Organize and Collate data at a Single Place for easy Access and Management
While in the first step it’s always the natural guardians like the mother and father , it’s also important to consider alternative guardians in case of unforeseen circumstances. It’s essential to decide who will take care of your child better in your absence, rather than leaving it up to chance.
#2 Insuring yourselves, adequately
Buying insurance in the child’s name isn’t enough, as the responsibility to provide for their education and other needs falls on the parents. It’s important to purchase adequate life insurance and disability cover to protect your child’s future and avoid any financial difficulties for your family in case of an unfortunate event.
For doctors running a hospital and having loans and other liabilities, it’s wise to buy a Life Insurance policy under the Married Women’s Property Act. You should also add your child’s name to the family health insurance plan.
Please note that we are referring to adequate Sum Assured and not the Number of Policies.
#3 Doing your Retirement Planning
Before saving for your children’s education or wedding, it’s crucial to allocate the required money for your old age. Even if you’re a business person or a professional, make retirement planning a priority to provide security to your child’s future.
Ensuring that you have enough saved for your old age will prevent your child from having to take care of you when they’re older and allow them to live independently.
Remember, for education there are loans available but for retirement no lender will lend you. Plus if you have decent networth in your name you can easily be a guarantor for your children’s education loans, but if you use your sayings towards your kids education expenses compromising your future, there is no guarantee that your children will take care of you in future.
#4 Keeping yourself Light on Real Estate
Real estates are doctors favorite Investment Asset. This is a very well known fact. And there are reasons for it. Could be the Cash surplus to deploy or high disposable income or lack of financial knowledge and thus avoiding the financial instruments.
Thus many times even for your child’s safe future you prefer to buy properties, real estate management can be challenging in India.
Unlike financial instruments, real estate requires more effort and time to manage. As previously mentioned, always consider the “what if” scenario, and in the case of real estate, it’s important to consider what will happen if you’re not there to manage it, or your child prefers to move abroad permanently, or you are not in a position to manage the same.
Consider keeping your real estate investments light, and opt for easier-to-manage investments that don’t require a lot of time and effort.
#5 Not falling into the trap of Traditional Insurance Plans
After real estate, doctors are observed to have lots of insurance policies in their portfolio. As they are in touch with the bankers or insurance agents who will sell the products suitable to them not to the buyer.
And under the lure of safety, just like real estate doctors fell for such pitches.
Traditional saving instruments have low returns though with high safety. An these are generally very long term plans. Now if you have to serve an investment for 20 years then its no brainer that only equity will provide you the growing and inflation beating returns. Investing in equity is essential to reach your goals. Because remember education cost has been growing @ 10% and you cannot beat that by staying invested in 5% product.
However, high equity means high volatility, which may not suit your risk profile. Asset allocation is the answer here.
When we talk about securing a child’s future, normally busy professionals like doctors fall for sales pitches and end up accumulating insurances and real estates, which is not a right approach.
It is advisable to have a structured plan in place considering all the important goals which need to be achieved in the available limited resources, and see the interlinkages between them as per their priorities in the financial life.
Moreover, it’s not only about investment for kids but securing self to provide security to kids.
Besides money , the family environment and values also play a significant role in shaping their future. Children tend to learn and mimic the behavior of their parents, so it’s essential to be a positive role model for them.
Keeping your actions in check and imparting goodness to them will go a long way in ensuring their success and happiness.
Remember that every decision and action you make has an impact on your child’s future, so make them wisely.