Congratulations on becoming a parent! We know the feeling is something indescribable. You have now started a new and joyous part of your life and we are sure the journey ahead will be exciting.
You would also be feeling the weight of responsibility as it is probably the greatest one in your life so far. By taking some small but important steps, you can at least make sure that the financial aspects of this responsibility are handled with care. Here is a short list, that would be helpful for all new parents to follow.
#1. Increase savings
While it seems simple enough, it’s the first crucial step. You are going to see increased expenses soon and more later. It would be smart to increase your savings now to cater for them. It would also be a good idea to look at your emergency fund and give it a boost. A job loss or healthcare emergency can be painful at this stage. Be smart, be prepared.
Health care expenses are likely to be higher now and adding your child to your family healthcare plan is prudent. Also allocate a portion of your savings regularly for healthcare expenses. You will be visiting the doctor often enough for shots for your baby. Unless your insurance caters for it, your expenses can mount quickly.
#2. Plan for higher expenses, such as health care
Health care expenses are likely to be higher now and adding your child to your family healthcare plan is prudent. Also allocate a portion of your savings regularly for health care expenses. You will be visiting the doctor often enough for shots for your baby. Unless your insurance caters for it, your expenses can mount quickly.
#3. Get a term life insurance policy if you haven’t already
Life is uncertain but you can take steps to make sure that this doesn’t impact your family. It would be a good idea to keep the amount in line with your income and how much your family will really need versus a round figure of Rs 1 Cr. It’s relatively cheap to acquire and can give you some real peace of mind.
#4. Start a SIP in a liquid fund for school education expenses that will start in three years
If savings permit, try to get a head start on school education fees. It will help you avoid suddenly burdening your income with another expense that can often involve lump sum payments. Education inflation, which was trending at 12% in the recent past, tends to be much higher than normal inflation. This needs to be kept in mind when planning for any education related financial goal for your child.
#5. Good time to start a college fund
Invest in a portfolio of good equity mutual funds to save for your child’s college education. Starting this early means a lower SIP commitment required and thus your income is less likely to be a constraint. Considering the many financial responsibilities, you are likely to face at this point, this can be a real boon.
Also consider if you want to think about a foreign education for your child. This will mean planning ahead and investing in a more diverse portfolio that includes international fund of funds. Considering you will have a good 17 years this can be achieved with relatively lower SIP amounts.
Hopefully, these five pointers can really help you feel at ease as you start this new phase of your life. All the best!