How 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.