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Smart ways to financially secure your child's future
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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The day your child is born marks the beginning of a lifelong journey. As a parent, you have so many dreams for them and long to provide them with the best life that you can. But one of the most important things to do is to ensure their financial security. With rising costs of living, education, healthcare, and other needs, it might become a challenge to ensure that your kids have a secure financial standing; however it doesn't need to be impossible.
Here are some smart and effective strategies you can use to help set up your child's future including creating a savings plan, opening a dedicated kids savings account, taking out life insurance, and exploring investment options so that your little one grows up as confident and secure in their finances as possible.
Teaching children how to spend wisely at an early age can help them develop good spending habits. Introduce them to budgeting basics, such as saving part of their monthly allowance and ensuring they understand the value of money and why it should be spent wisely. Encourage them to think critically about purchases before spending their money on items that may not be useful or necessary in the long run.
Opening a kids savings account for your child can help you teach them about budgeting and money management for different short and long-term goals from an early age. Such an account can empower them with the tools they need to grow their funds over time and provide invaluable insight into budgeting and progressing as a smart consumer.
Documents required for bank account specifically for kids or juniors can vary depending on the type of account you choose and their requirements. Kotak provides an easy online process to apply for a junior bank account with basic criteria and documents, including identity proof, address proof, signature proof, and minor proof, making the whole process stress-free and simple.
Having children’s bank accounts is one step; however, it's crucial to include insurance as well. Besides evaluating your life cover requirement based on the increased monthly expenditures post-childbirth, also assess the cost of meeting your child's future goals (such as education or marriage).
Several types of insurance policies are available, such as life insurance and health insurance. If financially possible, consider insurance plans with a high sum insured, as it helps your family get adequate financial security during unforeseen financial emergencies or losses.
Mutual funds are managed by professional fund managers who have expertise in investing money into different types of securities, such as stocks, bonds, and commodities. By investing in mutual funds through an SIP, you can benefit from the consistent power of compounding returns over time and rupee cost averaging that balances out your purchase unit in the long term. SIP also offers much more flexibility as you can adjust the frequency and amount of payments according to your financial situation.
Also, to avoid inconvenience in the future, try to prepare a will to outline how assets like stocks, property, lands, etc., will be passed to your children during unfortunate events.
To wrap up
Financial security starts with wise decision-making from a young age, something all parents should encourage their children to develop. By introducing your child early on to budgeting basics, setting savings goals, creating an emergency fund, and teaching them good spending habits, you are helping set them up for success in the future when it comes time for them to decide how best manage their finances independently.
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