Planning a future for the new borns

Komal and Jas are a working couple and earn enough to enjoy a lavish lifestyle. They have been married for five years and are planning to start a family soon. It is going to be a life-changing event, so they need to modify their spending habits. They want to put the changes in place before the baby arrives. The first step, however, is to estimate the cost of raising a child. The estimate will depend on their income, savings and goals for the child.

Planning a family is a time for would-be parents to ramp up their savings net. Komal and Jas must have 6-9 months' expenses as savings in their emergency fund, which can be used when Komal decides to take maternity leave. Apart from the additional expenses related to the pregnancy and the arrival of the baby, the couple need to decide whether Komal would take an extended break from work. They need to adjust their expenditure accordingly and save enough for a transition from a two income to a one-income household.

They may have to reorient their monthly budget—instead of buying luxury white goods and going on holidays, they will have to use the money for higher medical care expenses and hiring a nanny for instance. 

It's never too late to start planning and saving for the long-term. Komal and Jas need to rework how they plan to fund their home loan EMI and meet other household expenses. Add to that the cost of raising a child and paying for higher education.

Investments will be key for ensuring the child's future. New parents should start saving early for both short-term as well as long-term expenses. While long-term investments can be made in equity, investing for short-term goals should be made in debt mutual funds. 

The arrival of a child heralds a change in spending and saving habits. It is important to rework financial goals, ensure a clear strategy for funding them, and begin a saving and investing plan. A young family requires the highest capability in planning as it straddles liquidity, return, risk, short-term needs and long-term goals, all at once. 

With inputs from:http://economictimes.indiatimes.com/articleshow/46563531.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst