Earning mother? Here is how to gift your child a secured future

SOURCE : FC : M Damodaran, Kumar Shankar Roy May 09 2010 , Bangalore

As yet another’s Mother’s Day (May 9) goes by; here is some food for thought for financially independent mot-hers. While a second inco-me from the mother adds to better lifestyle, experts told Financial Chronicle that it is equally important for mothers to ‘help’ their kids reach financial independence.

The goal is make children financially independent wit-hin 25 years and mothers can do this by setting aside a fixed sum of money for ensuring the child's education, covering potential future expenses (marriage) and hea-lth expenses by setting aside just Rs 5,000 per month.

For children’s education, the most important product is child plans – which help build the required financial corpus, when a child needs it. A child plan can assure a sum of 25-30 times of the annual premium paid for a policy term of 20 years. Monica Agrawal, business director to the chief executive officer of Aviva India, advises young mothers to prepare for a situation when both parents may not exist. “Having spent several years in the financial services industry, I have the benefit of being aware about the importance of financial security, diversification of financial assets and the importance of starting early to capitalise on the power of compounding,” she said. Plans that are linked to milestones (like age of the child) and have the option of premium waiver (if parents die) are available, she added.

Just Rs 3,000 per month in an equity mutual fund for 20 years can give a corpus of Rs 98 lakh after 25 years, if one assumes 15 per cent annual rate of return. Investing for her child’s future through mutual funds is one of the most important financial decisions a mother can take, said Ashu Suyash, managing director and country head – India, Fidelity International.

“Making these investments in a regular and disciplined way through systematic investment plans (SIPs) not only ensure that a substantial amount is saved for the important milestones such as education, marriage, and setting up a house, among other things, but they also allow the mother to free herself from financial worries,” said Suyash.

To care about the health of their children and family, Akshay Mehrotra, head (marketing), Bajaj Allianz, said mothers today have the option of choosing from a host of health insurance products ranging from individual health plans, critical illness plans, top-up plans for higher cover and family floater plans. A family floater policy (which covers two adults and two children) can give Rs 10 lakh protection at less than

Rs 1,700 per month.