Financial Responsibilities as a New Parent

With the advent of nuclear families in India, a lot of couples work and stay in cities far off from their home towns. Along with social structures, the financial structures are changing rapidly. Multiple incomes, less time for wives at home, responsibility of managing kids. Amidst all this, new parents also have some pressing financial decisions to make which they cannot afford to miss.

As soon as you welcome your little ones into the world, your dependents multiply and it is an important time to plan and adjust your financial life. You have to be able to pay for your children's health, education and other major expenses. There can be many things to do depending on a couple's individual situation but two stand out.

Term Insurance: Insurance against loss of life. God forbid but for any reason if the earning family member is no more, the rest of the family might have to face much more than emotional distress. How does one pay for outstanding home loan EMIs? How about the education/healthcare needs of your spouse and children? Can the spouse take care of all future expenses of kids? A couple must sit together, write down big ticket expenses, higher education, marriages, rents, other living expenses and arrive at an amount. Go online and buy the cheapest term plan. Sooner the better. It is the cheapest insurance, costs like Rs. 5000/year for 1 crore sum assured. The only insurance it provides is in case of loss of life. DO NOT buy other so called "beneficial" insurances if you are looking for a term insurance. Other insurances have their specific purposes. Term insurance is a must for anyone who has liabilities. Take it for a term to cover until start of your retirement.

Large Expenses: I am sure everyone is well aware of the educational expenses one has to incur for getting into a graduate/ post graduate school. In today's time, a lot of them cost 50 lac+ (of course there is a large range). However, that is today's money. Add 6% average inflation for 17 years to that and you get 1.34 cr. That's the amount you'll need to pay when your kid goes to college. That is just to give you an idea. You incur expenses for many more things. The idea is to recognize major expenses beforehand and plan for them. Instead of shelling out 1.3 crore at one go, you need to reverse plan and start investing when you have a child. Look for low cost long term equity related funds (won't go into details of why equity and which funds) since despite the recessions, scams and whatever else the world has seen, financial markets beat other forms of assets over a long period of time. Start SIPs for each large expense and do 2 things. Never stop the SIPs irrespective of what happens to stock market. Increase the investment amounts every year by a few percentage as your salary grows.

You can select funds by doing your own research on financial blogs or look for a good paid financial adviser to help sort out your finances.

All you'll need is patience and discipline to be able to financially support your family. You will spend some more enjoyable moments with your family instead of worrying about where to get the money for next big expense.