In India, there was a time when you could run an entire month with a princely sum of Rs 500 and still have some to save at the end. Today, a couple of pizzas at Dominos cost Rs 500. So, the value of money is decreasing drastically. Under such circumstances, we are never far away from a financial emergency.
One must say that every Indian family experienced one during the second COVID wave in April 2021. As a result, hospitalization expenses zoomed to unprecedented levels. So, a significant majority of the population was in a financial crunch. However, the silver lining is that it reinforced the importance of financial planning, with everyone planning for the future.
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Get your priorities right – Prepare a budget.
Every year we sit down in front of our TV sets to watch the Finance Minister put forth the annual budget for the country. But, have we ever thought of preparing our domestic budget? If not, let us make a start straight away.
- Involve everyone in the family when preparing the budget. It includes your children and parents because they also have their requirements.
- Take a piece of paper and write down the income on the left side. Next, list out the expenses on the right side. Concentrate on unavoidable expenses like power bills, telephone bills, groceries, transport, school fees, books, urgent repairs, maintenance, medical contingencies, etc.
- List out the avoidable expenses like dining out, purchasing fancy items, tourism, recreation, etc.
- Determine the surplus after deducting all expenses. You can save this amount every month. Please create a particular savings account to earmark a portion of the rest as a contingency fund. You can invest the balance surplus in various investments that generate good returns. We advise you to spread the investments properly in multiple products, depending on the risk factor.
The idea behind including children in this budgeting exercise is to introduce the savings habit in them. They should understand that saving money is critical for survival in the future. Therefore, it is better if they develop the habit early.
Develop the saving habit in children.
You can give pocket money to your children for their miscellaneous expenses. At the same time, you should encourage them to save as much of their pocket money as possible. You can add to their savings by contributing an equal amount as an incentive at the end of the month.
Teach your children not to dip into their savings frequently to meet their expenses. It can result in the erosion of their savings. If you plan to ensure financial stability for generations, you would not like that to happen. We suggest you open joint recurring and savings accounts in children’s names and encourage them to continue maintaining the account even after becoming majors.
Besides, the children should also know the significance of taking loans and repaying them on time. It brings in the element of financial discipline that can stand them in good stead.
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Invest in insurance products.
Please ensure to invest a tidy sum in insurance. You have your car insurance because it is mandatory for everyone to have that. Similarly, health insurance and life insurance are compulsory for every individual if you wish to make a financial plan that can last for generations.
Many people feel that investing in insurance is a waste of money, but insurance is the only resort you have when life hits you hard, especially as it did during the COVID second wave. Please teach your children the importance of insurance and encourage them to have policies that can prove helpful to them during their higher education. The best aspect of encouraging children to save is that it develops into a good habit that passes on to future generations.
Invest in appropriate government schemes.
The government of India has formulated special schemes for the empowerment of the girl child. The Sukanya Samruddhi Yojana is the perfect example of an investment that supports the Beti Padhao Beti Bachao campaign. This plan is unique in the world as it is the only savings plan targeted toward the welfare of a specific gender. This scheme is not available for boys.
Financial planning is essential to take care of emergencies that can come in the future. You are better prepared to handle a financial crisis if you plan well. Teaching children about the importance of savings in life is critical to their growth. Please lead by example and practice what you preach. As parents, you are their role model. The children imbibe good and bad things from you. So, we advise teaching them good things like financial planning that can prove helpful for generations to come.