Financial advisors are proficient in developing the ideal investment portfolio for their clients to help them achieve their goals. However, when it comes to financial planning for their children, they have to start telling clients to take the right steps before the baby arrives so that they have sufficient funds for all their needs.
The first step is to ensure that your client has adequate insurance. The goal is to create a strong financial support which serves as a ladder for the kid’s different requirements. Since the child will be dependent on the parents, it is their responsibility to make sure that the kid has significant corpus if anything happens to them. Therefore, advisors have to make sure that their client has an insurance policy with a sum assured that is a minimum of 10 times their monthly earnings. Insurance will provide your client’s kid financial security in case of an unforeseen event.
The second objective is to take care of short-term and long-term costs.Financial experts must explain to their clients that they will require funds from the time of the child’s birth till he or she is 20-25 years old. For long-term objectives with duration of 10-15 years, advisors must suggest clients to opt for 70-80% allocation to equity and mutual funds in their portfolio based on their risk appetite. To manage short-term expenses of the child like school/college fees, trips and other extra-curricular activities, persuade clients to invest in fixed deposits or debt funds.
Often, parents tend to ignore their own goals when they start saving for their child. As a result, they might not think about building their retirement corpus and spend the money for their child’s financial needs. As a financial advisor, you must ensure clients don’t commit this mistake. Develop an appropriate plan so that your clients can pay for their kid’s expenses and at the same time save for their future.