Babies add greater joy and meaning to life. However, preparing for a baby means more than buying clothes and toys and decorating a nursery. Studies show that in 2018, raising a baby from infancy until he or she becomes 21 years old, cost Rs.67.4 lakh. This number stresses the importance of thorough financial planning in order to provide for your family a new home.
Here are the 5 financial steps you should take when a baby is on the way.
Avail insurance or upgrade your existing plan
With healthcare inflation rising at a whopping 15%, medical expenses can burn a hole in your pocket. So, protect your finances by availing relevant insurance plans or upgrading your existing ones to make room for your baby. No insurer offers a standalone maternity insurance policy. Avail a health insurance plan that covers you and your child from the first day of his or her birth. Next, add your child to a family floater plan when he or she becomes 30 days old. Finally, buy a term life insurance or upgrade your existing one to provide adequate coverage to your child.
Build an emergency fund
Since emergencies come unannounced, it is important to create a dedicated corpus to tackle these urgent needs. So, if you haven’t started saving for emergencies, now is the time to do so. With a new family member on the way, add expenses specific to the child. Include post-delivery expenses and the amount needed to provide for the baby and add the same to your emergency fund.
Since this fund should be easily accessible, invest your money in liquid options or simply park it in a savings bank account that has no ATM card. This way, you can access the funds only when you need them. If you have investment on your mind, then you can consider Corporate Fixed Deposits like those offered by Bajaj Finance to enjoy the safety of funds and also earn higher FD rates. This FD offers ample liquidity with interest payouts offered on a monthly basis and comes in handy during emergencies.
Draw up a pre- and post-delivery budget
It is always wise to anticipate and provide for probable expenses. This allows your finances to be in good shape. So, draft a pre-delivery budget and a post-delivery budget to provide your family with adequate financial backing. For the pre-delivery budget consider various insurance costs like exclusions of your health plan, deductible, and co-payment amounts. For post-delivery budget, include the necessary expenses like diapers, baby food, and medical costs for the baby and the mother, among others.
Plan for long-term goals and expenses
You will certainly want to provide your child with the best of everything, be it education, extra-curricular activities, travel or their wedding in the future. So, start planning for these goals now in order to accumulate enough funds when the time comes. When you start investing early, you can benefit from the power of compounding power and long investment horizons, which together yield high returns.
According to your risk tolerance, diversify your investments across low to high risk options like an FD, bonds, SIPs, and equities. In case you are blessed with a girl child. Invest in Sukanya Samriddhi Yojana to provide her with a financially secure future. Invest in Bajaj Finance FDs to enjoy high interest returns on your invested sum. For instance, a 36-month FD payable at maturity yields up to 8.75% for a regular investor and 9.10% for a senior citizen. Apart from this, you can also earn 0.25% extra interest on every renewal. Plan your finances better by using an Online Fixed Deposit Interest Calculator and invest according to your goals to fulfil them with ease.
Draft a will to divert wealth into right hands
To make sure that your hard-earned wealth goes into the right hands after your demise. Draft a will and list down all the nominees for your investments, irrespective of their value. This will prevent conflicts in your family. Appoint trusted guardians for your child and include their name in the will. So that they safeguard your investments until your child becomes an adult.
By taking these financial steps when your baby is on the way, you can pave the way for a secure future.