Mutual Fund |
September 03How to do Financial Planning for child with special needs
Coping with a child with
special needs isn’t easy. But, you can make a difference financially if you are
aware of the hurdles that lie on the way to securing your child’s future and
plan accordingly.The cost of raising a child is high, but
for the child with special needs, it can be higher as there are additional cost
involved such as medicines.
Along with it, long-term planning is essential to ensure that your child is
well provided for, even after you are no longer around to provide the care
yourself. Since you need to create an
inflation-beating nest egg, it is prudent to take some more risks with your
investments. The following are the steps which will guide you in the process of
Financial Planning for the child with special needs
Estimate the Lifetime cost: Identifying
the cost for the lifetime care of the child is necessary. This cost should
cover not only the financial requirement but also the legal aspect. The
financial assessment is possible only when parents have an estimation of the
child’s expenses. Most do not have it as it is part of the family expenses. It
then becomes ideal to create a budget and identify the child’s expenses
separately to bring accuracy in estimating the lifetime cost. Apart from this,
any cost which may be incurred for addressing uncertainties in life should be
taken into consideration and included.
Insurance
is Must - With respect to the
life time estimation parents in order to secure
their child’s future must get a life cover which is at least 10 times their
annual income. To ensure that there is enough cash flow when the child ages and
the parents retire from their job, investing in an annuity plan that gives
payments to the child will be a good option. Parents should also look actively
at health insurance policies available for special children. So that they are
able to meet any type of contingencies in the near future
Start
Investing - The insurance will not be available
after a certain age and may not be enough otherwise. That’s where your personal
savings will be important. Start setting aside some amount for building a
corpus by investing in Mutual
Funds and making equity investments at regular intervals for your
special needs child. This corpus may be needed for multiple expenses which may
include legal cost, professionals and funding expenses in later years of life.
Create
an emergency fund - Create a
separate emergency or contingency fund for contingency expenses related to your
child. One should start savings for meeting emergencies. The money saved should
be then invested in liquid funds and fixed deposits which are considered to be
cash equivalents and hence can be converted to cash or can be liquidated easily
at the time of emergency
Create a Will and Trust: A
Will is an important element to make sure that the assets you leave for your
child are transferred to the trust. For a minor child parents can appoint a
guardian through the Will. Simultaneously they can also form a trust to ensure
the protection of assets for your special needs child. The money that you will
save or the inheritance that will be received by the child can go directly into
the trust. A life insurance can be assigned to the trust and your estate can be
transferred to the child when you die.