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A guide to financial planning for your child when you’re in your 30s and 40s

Sep 04, 2019 | 6 months ago | Read Time: 3 minutes | By iKnowledge Team
A guide to financial planning for your child when you’re in your 30s and 40s

Introduction

Whether you’re in your 30s or 40s, financial planning is a must. It becomes even more critical when you have a child in the picture, because nothing can take precedence over safeguarding the financial future of your loved ones. At this life stage, you are likely to be doing well in your career, and making smart financial choices at this stage will carry forward into your later years.

Financial Planning Tips for Your Child

Here are some savvy tips for financial planning in your 30s and 40s as a parent.

  • Budgeting is all-important – It always helps to draw up a budget. It doesn’t have to be anything fancy and flashy, but get a clear understanding of your income, whether it is from your employment, investments or any other source of income such as an inheritance. Against this, jot down what your monthly outgoings are. Completing this simple exercise (and reviewing it periodically) will give you a good sense of where you are financially, and what better can you do to optimise resources. This also helps you understand just how much you can put away to save towards your child’s future.
  • Cutting back on expenses – While you don’t have to forego on all your luxuries, it would be prudent to cut back on some expenses. By all means, don’t compromise on essentials but do modify your lifestyle such that you save more money than you spend. For example, if you go out to dinner at a restaurant every weekend, try bringing down that night out to once a month. Or, don’t make it a routine visit to the movies, where even the popcorn costs more than the ticket price! This will see you save a reasonable sum in the long run, which you can look at investing instead.
  • Minimise your risk-taking – No, we don’t mean bungee jumping or paragliding here, but it’s your investments we’re talking about! When you have to provide for a child well into your 60s (your child will be in their early 20s then), remember that what you need are secure finances. Don’t be heavy-handed with the equity, unless you avidly follow the markets, and it is best to avoid any form of investment that may erode into your capital. Instead, evaluate balanced mutual funds, or an insurance policy that will provide for your child over the long term.

Planning Well for The Future

When you’re forecasting your budget, remember that you need to factor in education for your child, keeping in mind that very real challenge: inflation. A programme from a premier institute today might seem affordable, but 20 years down the line, when you are close to retirement, the same sum might look astronomical. Another aspect to keep in mind is your child’s wedding, which is also something you need to plan and budget for. Hence, planning wisely is the key.  Take a look at this insightful piece that tells you how you can make the most of your budget to save for your child’s future. A child plan is a great option to evaluate at this stage.

Conclusion

What we often forget, as parents, is that the child’s education needs to continue unhampered even in our absence. This is especially true if you’re in your 30s and 40s with young children, who will likely require your financial assistance for a long time still. Therefore, don’t forget to obtain adequate insurance cover for yourself, so that in the event of your passing, your child’s financial future does not suffer. It is not just life cover, but also health insurance that you need to have for yourself.

While you’re planning for your child’s secure financial future, don’t forget to keep in mind your own retirement plans as well. If you don’t wind up saving enough to tide you through your golden years, you might have to be dependent on your child subsequently. Make sure that while you secure your child’s future, you prudently also secure your own. To know about Aegon Life’s life insurance products like term insurance plans and other products like health insurance, visit our home page.


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