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When a child is born, it completely changes the lives of the parents. With the addition of a new family member comes a whole new responsibility of re-organising one’s finances to ensure that the child’s wants and dreams are fulfilled without trouble.
First time parents are likely to be confused - they may not know how to plan, where to invest and how much to invest. Additionally, the choice of life insurance can also be tricky - they don’t know whether they should go for a simple guaranteed1 savings plan or opt for a regular income plan or both, depending on their investment capabilities and many other factors. All these doubts must be clarified before embarking on this new exciting journey.
Before jumping to the investment tips, we must understand why it is important to start investing for a newborn.
Why should you start investing for your baby?
The birth of a baby, no wonder, brings unparalleled joy into the life of the parents. But with it comes bigger responsibilities and expenses. Baby care, vaccinations, medical check-ups, schooling, pocket money, extra-curricular expenses, higher education, marriage etc. require a lot of money. With the increasing demands of the future generation and continuous lifestyle changes, it is only normal to worry about your child. As a newborn’s parent, you should not only think about saving money but also growing it.
A simple way to start is to look for a good savings plan with critical illness benefits that takes care of all essential needs. Investing wisely ensures that your child’s needs are met, and dreams are fulfilled without compromise. Appropriate life insurance eases the burden of any risk that you may face by providing monetary security to the family for a nominal premium amount.
The following three investment tips can help choose the best investment plan for parents and be thought of as a guide for first-time parents.
1. Plan your budget and financial goals
The first step is to calculate your child’s possible monetary needs and construct a budget to
smoothly achieve future financial goals. For this, you need to calculate medical, educational,
recreational and daily expenses, besides setting up an emergency fund to ensure a comfortable
life for your baby. Drafting a budget should consider inflation to give an accurate idea of the
future costs you have to bear. As investing in your child’s future requires considerable planning,
you can consult a certified financial planner who can explain your options in detail to help you
choose the best life insurance and savings plan.
It is advisable to avoid rushing into any kind of investment when you invest for the first time
as a parent. Your investment capital should strictly depend on your financial goals. So, it is
better to start slowly and gradually increase your investments to help you achieve your goals
Moreover, financial discipline is critical to meet your long term goals as planning for a child’s
future is not a short term goal. Disciplined savings and meticulous planning bring financial
independence to your life.
2. Diversify through asset allocation and evaluate risk appetite
For this, you must have complete clarity about the products in which you will be investing,
the risks they carry, their return potential, etc. Once you have good knowledge of the
investment products, you can start investing in them. Avoid putting all your money in a single
investment product to reduce risk. Instead, diversify your investments across different
instruments like term insurance, provident funds, mutual funds, gold, recurring deposits and
so on.Life insurance and savings plans offer additional riders# that come with critical illness
benefits,which provide additional coverage for certain medical emergencies. Thus,
by diversifying your assets, you can keep your portfolio risk under control and continue
to receive consistent and attractive long term returns.
It is also equally important to understand your risk appetite before you start investing. If you
have a low-risk appetite, you can invest more in fixed deposits, regular income plans and debt
instruments.A high-risk appetite entails investing in relatively riskier assets such as equities.
3. Decide the time horizon of your investments.
It is important to decide your investment horizon as it plays a key role in determining your
income requirements and desired risk exposure. That way, it helps to choose the appropriate
investment products. Certain short term investments may be associated with a higher risk of
loss when they are closed before the expected time. Investments with a longer time horizon
can avoid potential losses as the relative volatility of the investment is smoothened out over
the period. A regular income plan spread over a child’s formative years is a suitable choice
as it ensures cash flow over regular intervals.
Tata AIA Life Insurance Fortune Guarantee Plus (UIN: 110N158V02):
Tata AIA Life Insurance offers the right insurance plan suitable for first-time parents - Tata AIA Life Insurance Fortune Guarantee Plus plan (UIN: 110N158V02). In the initial days with a newborn, the expenses can be hard to track. This plan, therefore, offers the flexibility to choose between multiple options to enable some breathing room for the new parents. This plan also offers a return on the premium at the end of the maturity period.
Remember that how you manage your money today will directly impact your children’s finance in the future. Therefore, you must think deeply and plan carefully for your kids. Additionally, you must regularly review your investments to realign them with changing financial objectives over the years.
By submitting your details, you are giving your consent to receive SMS/Call by Tata AIA Life Insurance Company Limited or its representative, with reference to this solicited inquiry even though you may be registered on the DND list. L&C/Advt/2019/Jan/075
1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry
#Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office