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You are here : home > Raising Children > Related Articles for Raising Children > Financial Planning for Children

Financial Planning for Children

Financial Planning for Children

With regards to making arrangements for their youngster's future, there are different issues that parents face. Most don't have a clue where to begin, what to precisely put something aside for, the amount to contribute and where to put their cash. Earlier guardians or parents didn't confront this issue. In the ongoing decades, with the soaring education cost, parents currently need to thoroughly consider their funds for their kids.

Bringing-up child as a successful and responsible individual is a dream of every parent. Almost every parent sacrifices his or her own desires and wishes to secure their child’s future. Many parents also face a lot of hardships to save money and fulfill their child’s dream. However, planning the future of children is incomplete without financial planning for them during each and every stage of their development. Have a quick look at different phases where financial planning is needed for growth, development, better career and better future of children.

Process of financial planning

1) List down the requirements for which you need to save money
2) Set goals for future
3) Analyze your budgets and expenses. And figure out the areas where you can cut down and save more.
4) Evaluate your investment options.
5) Start investing.

Phases where financial planning is required:

Planning a Baby

Financial planning for the child begins even before the birth of the child. This is a stage where most of the couples start financial planning even before they conceive. Especially, when the mother is working and household expenses are born by husband and wife equally. In such situation many parents decide to save money when expectant mother takes maternity leave so that they are able to manage the expenses properly. At the same time finances are required to carry out tests during pregnancy, medicines and to pay the hospital bills after mother delivers her baby.

Parents also need to plan for extra money which may be required if cesarean-section is done or any other complications arise during pregnancy. In certain cases parents also need to arrange finance when they are not able to conceive naturally as they have to spend lakhs of rupees on treatments like IVF etc.

Birth of Baby

When baby is born, parents are completely in a new world and their new world is none other than their baby. They want to provide their baby with the best things available around the globe. Right from the baby’s cradle, baby’s clothes to baby products everything is bought with extra care. In such case parents need to make sure that they save some money to fulfill these requirements also.

Baby’s Health

Newborn babies require special care. ,Newborn babies are very sensitive and as such are very prone to minor infections. Therefore parents also need to spend money to take care of their baby’s health by availing proper treatment from pediatricians.

Daycares, Creches and Nannies

Normally working mothers prefer to take leave from work to take care of their babies for at least 6 months to 1 year. Once the baby becomes older they decide resume work. Therefore, to continue work, mothers need to take services provided by daycares, creches and nannies. Parents need to take care of such expenses also. However, in India many working mothers depend on their mothers or mother-in-laws to care of their babies when they are working.

Admission in Pre-Schools

As the baby grows-up parents need to admit them in pre-schools. It is the time when parents introduce their child to a new world. As such it becomes important for them that they enroll their child in a pre-school. which prepares their minds for entering schools for primary education. At the same time they want to ensure that the environment is safe and hygienic. To provide all these facilities to their toddler parents have to spend a good amount of money on the pre-schools too.

School Admissions

Getting educated from a good and reputed school is the first step towards bright future. However, taking admission in good schools is not so easy. Along with the payment of donations of schools parents also need to spend money on school fees, tuition fees, books, extra-curricular activities etc. Therefore, parents need to plan finances properly for enrolling their apple of eye in good school.

Higher Education

To make sure that child chooses one of the best career options, it becomes mandatory for parents to arrange finances properly for the same. However, these days many insurance companies are providing excellent education plans. Such insurance plans ensure parents that financial problems do not become a hurdle for providing appropriate education to the child. Today’s competitive age makes it obligatory for all parents to choose proper plan for their little wonder so that he or she can choose a career option according to his or her desire.

Prospective Life

Many Indian parents also plan for the prospective life of their child. Once children get married parents are free from their responsibility. However, a new financial planning begins with the end of financial planning for children. As the couple starts heading towards old age, they have to think about the availability of finance during this stage. But this issue can also be taken care by selecting a proper pension plan. Thus, financial planning has become easier due to the growth and development of insurance sector in India.

How are savings and investments different from each other?

Financial planning can be done in various ways. It could be for a short period of time and for a smaller cause or a long period of time for a big phase of your or your child’s life.

Savings and investments are two very different things that we often mistake for being the same. Savings are usually done for short future goals or emergencies. Whereas, investments are for long term future needs. You wouldn’t expect your savings to increase as the time period is a small one. But, your investments increase over time. Investing your money could be in the form of mutual funds, stocks or bonds.

Before picking investment instruments for your kids, the initial step is to recognize what are you contributing for. Defining objectives will assist you with figuring out which monetary instrument you ought to pick. Before you begin contributing for your youngster, you ought to likewise think about some essential standards. The activity should begin with an evaluation of the reserve needed to satisfy future objectives for the kid.

Tips to keep in mind before investing your money:

  1. Understand your financial needs: before you even consider investing, make sure you make a list of things that you are trying to achieve in future. Investing your money wisely is the only thing that matters the most in financial planning. If not done right, it could cost you your dreams and goals. Understand your financial needs and the goals that you are aiming to achieve.
  2. Evaluate investment options: in today’s time, there are so many investments options that you may tend to get confused. Do your research and understand the pros and cons of each option. Invest in the option that is most suitable for your needs and requirements.
  3. Analyze your comfort zone: there are going to be risks in every investment option. You need to figure out the amount and extent of risk that you are comfortable taking.
  4. Try and invest in various areas: try dividing your money and investing in more than one area of investment. This way, you would have backups in case the result of one of your investments turns out to be average or poor.
  5. Keep aside some money for emergencies: don’t invest all your money at once, keep aside some money as savings for emergencies.

Financial planning is something that parents constantly think about to make sure their kids have the future they desire. But it is also important to make sure your children grow up to be independent individuals. They must learn the importance of money and saving it.

Here are some ways to teach your children the importance of money and savings:

Piggy banks

This is a step, you can adopt from a really early stage of your children’s lives. Giving them piggy banks of their own and asking them to save up, penny by penny, could really be an interesting activity for your children. This would make them excited to see how much they have saved at the end of each month.

Provide pocket money

Try and set a budget for your kids. By providing them pocket money, you would ensure that your kids are living on a budget and they don’t end up overspending. For example, tell them you would be giving them an amount of money per month, depending on their daily expenses and make sure they survive the whole month within that budget.

Set saving goals

Well , with the pocket money and their personal piggy banks, you can ask your kids to try and save a little from their pocket money and put the savings in their piggy banks. Ask them to start by saving a small percentage of their pocket money, for example, 5% of their monthly pocket money. When they save up a big amount after a couple of months, they would understand the importance of saving.

Include them in basic financial decisions

We all have budgets for our homes, we usually set a budget for monthly groceries, bills and other miscellaneous expenses. Including your kids in the budget making process and basic financial decisions could help them understand the importance of living on a budget.

Saving up for expensive purchases

Our kids often demand expensive games and gadgets. Although, these demands are not always unreasonable, it could really mess with your monthly budget. Instead of fulfilling their demands right away, you can ask them to save up for a couple of months and then make the purchase.

Explain them the difference between wants and needs

When we desire something, we often forget the difference between what we want and what we really need. Explain your kids the difference between what they want and what they really need. So they don’t end up making an unreasonable purchase.

Encourage them to earn at an early age

Encourage your kids to join internships alongside their school and college. They would be earning a stipend for themselves, which would build a sense of independence within them.

Tracking expenses

Make your children track their expenses on a regular basis. Ask them to write down their daily expenses so they understand where their money is being spent.

Open a bank account

There are savings account options for children as well. Open an account for them so they understand how bank savings actually work. Bank accounts for savings are practically bigger versions of piggy banks.


Children are taught about taxes and financial sectors, but do they ever learn how to pay their taxes responsibly? Not really. You don’t want your kids to grow up and be clueless about how to pay their taxes as a responsible citizen. So make sure you include them while paying your taxes, this would help you teach them how taxes are practically paid.

Discuss FDs and investments

We all make investments, discuss your investment plans with your children. This would make them understand terms like FDs, mutual funds, savings and insurances. This information and knowledge is for lifetime and would help your child’s future.

Are you planning to save up for your child’s education? What are the various investment options to save up for your children’s education? How to financially plan your children’s future? Discuss here.

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Kiran Shaw
Kiran Shaw.8 years ago
very informative article. We must be aware of the financial needs so that we can make a proper planning. this article briefly explains about the need for a financial planning.
Samir Mathur
Samir Mathur.8 years ago
I had started planning for my son before he was born, as I had to take care of all the expenses right from birth through his growing up years and education.
Vrutti Kumar
Vrutti Kumar.8 years ago
Financial planning is the basis of a happy family. a proper planning allows for saving as well as expenses so that you enjoy a better life without worrying for future.
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