ByTheRupee - Personal Finance Show

Episode 14: Financial planning for children

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How do you plan all the financial needs like paying for graduation, post-graduation or even marriage? How do you give financial education to your children?

As a base rule, I shall take three mandatory things are taken care of :

  1. Emergency Fund - 6 months of monthly expenditure.
  2. Term & Health Insurance - to protect your family in case of unforeseen circumstances. Health insurance - for medical expenditure for you & family.
  3. Retirement Funds - you started planning and investing for your retirement.

    4. We shall approach this in two stages :

    1. How do you provide Financial education for children
    2. How do you invest for the Financial Needs for the future.

      3. Let’s see what are the ways to provide Financial education:

      1. Piggy Bank or Gullak: If kids are at age of 3-4, give them the piggy bank and teach them how to use it. Every week give a small amount and tech them to add in a piggy bank. This will help them to cultivate the habit of saving.
      2. Value of money:  Teach them the effort it takes to generate wealth. Give them the house chores at end of the chore give a small amount. With that, they will value time and money relation. This will also teach them to value the money and will not blow it on fancy toys.
      3. Pocket Money: As kids mature, they demand pocket money. Do not deny it. Give it with a cation that it’s limited to one month or one week and if they exhaust it they will not get more. This method will help them to understand budgeting and will allocate money for different needs.
      4. Talk about Money: Over dinner talk about money matters. Share information about money, savings and budgeting. Teach them how you budget monthly expenditure. If you are planning for a vacation teach them how you plan your budget on hotel stays, fuel and travel. With this, they will know money management skills and budgeting.
      5. Reading: Give them books on finance specially designed for the age group. With this, they will upgrade themself to the knowledge about money, savings and investments.
      6. Let’s talk about the tools for financial Investment :

        7. 1. PPF:  PPF is a govt back investment scheme started more than 50 years ago. And currently, the interest rate is 7.1% as of May 2021. It has a lock-in period of 15 years. This is a perfect time for the educational needs of your kids.   I have talked about the PPFin detail in my other episode/video/blog post - Do watch it. Link in description.

        2. SSY: If you have a girl kid under 10 year, you can open a SSY account in the post office or any major bank. This is also similar to the PPF account, backed by the Govt of India and currently, the interest rate is about 7.6%. It has a lock-in period of 21 years and the maturity amount is tax-free which can be used for marriage or higher education.
        3. SIP / Mutual Funds:  If you are comfortable with the stocks market then start a SIP as low as  500/monthly. The investment in mutual funds can beat inflation and provide better returns at 8-12% over the long run. If you are interested in opening an account, I have links in the description.

        It’s always to start the investment as early as possible in fact you can open these accounts on the day of the birth or max at 1 year, so that time and compounding can work in your favour. Take these steps as soon as 3 points of - emergency funds, term + health insurance & retirement planning is done. Good luck with your preparation.



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        ByTheRupee - Personal Finance ShowBy Darshan