YOUR INVESTING TIMELINE FOR KIDS
1. New born
· Increase your own life cover through a Term plan.
· Increase your emergency fund according to your new responsibilities and needs.
2. First 6 months
· Open a child’s bank account for cash gifts.
· Include your baby in your family health cover
· Make him the nominee in all your investments.
· Make a Will, if you haven’t done so yet, and appoint an executor/s.
· Remember that the child’s income, if any, will be clubbed with a parent’s unless the child has an income of his own (for example, as a model).
3. Before year 1
· Remember to always keep your child's corpus totally separate from your own retirement corpus.
· Start a Public Provident Fund account in the child’s name by using money from the child’s bank account as initial deposits.
· Start a Public Provident Fund account in the child’s name by using money from the child’s bank account as initial deposits.
· Invest in growth option of large-cap equity mutual funds via monthly Systematic Investment Plan route, in the child’s name or your own.
· Buy a long-term Ulip-based child plan to cover the risk of your death, and choose its highest equity option along with premium waiver rider.
· Begin giving the child a gold coin as a regular birthday gift.
· Later, you can supplement this with gold ExchangeTraded Funds.
· Start saving for school entry expenses, in suitable debt funds, and later in fixed deposits.
4. Year 2
· Continue with the Term plan, Public Provident Fund and the Ulip-based child’s plan.
· Deposit small amounts as gifts in the child’s bank account.
· Continue saving for school entry expenses.
5. Year 3
· Try to maximize PPF contribution, top up the Ulip-based child’s plan, and increase your Mutual Fund portfolio.
· Continue saving for school entry expenses.
6. Year 4
· Diversify the child’s portfolio further with a mix of individual large- and mid-cap stocks that have performed consistently.
· Keep updating your will so that it earmarks the assets for the child to ensure a seamless transfer in case of your premature demise.
7. Years 5 and 6
· Continue with the older investments and invest parts of bonuses, dividends and increments.
· Buy gold Exchange Traded Funds, if you haven’t done so yet, up to 2-5% of the portfolio.
· Increase large-cap stocks in the direct equity portfolio.
· Buy a separate health cover for your child or increase your family floater cover.
· Buy long-term Fixed Deposits to avail of tax exemption.
8. Years 7 to 10
· Continue increasing the existing investments by diverting parts of bonuses, dividends and increments to the child’s portfolio along with cash gifts.
9. Year 11
· Maintain the momentum in savings and investments.
· Take a balanced view of your investments.
· Stop investing in equity funds, and start monthly Systematic Investment Plans in balanced funds.
· Top up your Ulip-based child plan with any windfall income.
· Continue buying gold coins or gold Exchange Traded Funds.
· Initiate your child's education on debit cards, cheque books and online financial resources.
10. Year 12
· Even as you continue investing, make your child money-savvy by linking the pocket money with the savings account balance.
11. Year 13
· Child goals are very near, so be cautious.
· With the countdown for the use of child’s money on, start de-risking the portfolio.
· Gradually shift equity funds to safer options such as Monthly Income Plans or debt funds.
· Begin moving from mid-cap stocks to large-cap defensive stocks.
12. Year 14
· Continue Public Provident Fund investments.
· Update your Will regularly.
· Assess the child’s needs for the next few years.
· Go for fixed income and liquid options for reinvestment.
· Avoid any new long-term instruments with strict lock-ins such as Ulips.
13. Years 15 and 16
· Systematically move 60% of the Ulip and Mutual Fund portfolio into fixed income options such as long- and short-term debt funds.
· Switch from high-risk equity to low-risk debt-based variants in the Ulip-based child plan.
· Reduce the stock portfolio by first selling aggressive stocks and then the defensive ones.
· Extend the Public Provident Fund account by another 5 years.
14. Year 17
· With target age within striking distance, assess whether the money saved for the child would suffice.
· If you are falling short, look at educational loans instead of dipping into your retirement funds.
15. Year 18
· Your child is now an adult.
· Use your fixed income options, except Public Provident Fund account, for your child’s expenses.
· Use payouts from the Ulip-based child plan and encash Monthly Income Plans for education.
· If all sources, including loans, fall short, make partial withdrawals from Public Provident Fund.
· Otherwise, reduce more equity investments.
· Invest in long-term fixed deposits in the child’s name.
· Update your Will.
· Remember that a child’s income will now be treated as his own.
· Help your child in Internet-based tax filing.
16. Years 19 to 21
· Assess higher study needs of your child.
· Seek another 5-year extension of the Public Provident Fund account.
· De-risk the child portfolio further, if needed.
· Shift into debt funds (which give long-term capital gain benefit) and fixed deposits.
· Increase the child portfolio with windfalls.
17. Year 22 onwards
· Investments made in the child’s name can now be passed on for self-management.
· Redeem the Monthly Imcome Plans for marriage expenses.
· Encash gold Exchange Traded Funds to buy gold ornaments at the time of marriage.
· For investments that are in your name but made for the child, make a plan for their transfer.
· Keep updating the will if you make further investments.