Have children? You must invest, but keep these 5 things in mind

According to a survey conducted by BlackRock Global Investor Pulse in 2016, retirement, children’s education, and buying a home are the top three investment goals for Indians, who are the highest consumers of financial advice in the world. The survey revealed that family plays an important role in investment decision-making for Indians. Out of all these goals, financial planning for child could be most tricky with a lot of uncertainty involved. There is a great danger in this if parents neglect this aspect either out of misunderstanding or lack of knowledge as it could make or break their children's financial future. Even if some planning happens, do note that every child's needs and demands differ. 

At the start, remember, a child will have both short- and long-term expenses. It is important and at the same time, tough to calculate how much money you would need to take care of your child for 25 years. Vaibhav Agrawal, Head Of Research, Angel Broking Ltd told Zee Business Online that an important aspect of financial planning is planning for your child’s future includes their education and wedding expenses. 

Here are 5 things to remember while investing for your child:

1. Start Early - The key to any investment is the time you give your money to grow. And, there is no better way to do that than to start investing early. "Start planning early so that you give yourself enough time to save adequately. The longer time frame you have, the less you need to save on a regular basis," Agrawal said.

2. Go Equity - There is probably no better investment option for long term than equities. If you are comfortable with direct equities, go for it. "Since this is a long term plan, make the best of equity as an asset class. Equity funds can help you generate superior wealth and returns over the long run," Agarwal said. Even though equity investments come with higher risk, they help your money to grow faster.

3. Get insurance - While building corpus for a child is on everyone's mind, it is equally important to provide them with financial security. For this, getting an insurance is very important as it ensures that the progress doesn't stop even in your absence. "Build insurance into the financial plan for your child. The structure must be such that even in your absence the contributions to the plan do not get impacted," Agarwal explains. 

4. Set clear goals - To make any investment, you should know the purpose behind it. Setting a clear clear helps you identify the right time to put in and withdraw the money. Agarwal explained that for example, if the first tranche for college is payable 12 years from now, then shift your portfolio to debt or liquid funds at least 1 year in advance so that there is no liquidity risk at the milestone. "Set clear milestones and shift to liquid assets well in advance when you are near to the goal," he added. 

5. Do constant reviews - As mentioned earlier, child goals may differ from time to time and person to person. In this case, 20 to 25 years could be a long time to stick to the same plan. For this, you need to review your plan regularly. "Education costs may change, asset returns may reduce and risk may shift. A review every year and appropriate rebalancing are the key to keeping your child’s future secure and in tune with market reality," Agarwal said.