1st January 2018

Financial Planning for the Kids’ Future

When it comes to the institution of a financial plan for one’s children, many parents often miss the point completely and focus on things that don’t really matter. It’s not about mapping out a path for your child with regards to which kindergarten they’re going to attend, which elementary or primary school they’re going to kick-start their foundation phase education in, which prestigious high school they’re going to earn grades that get them into the best college in and ultimately which Ivy League college they’re going to attend.

Rather, it’s about what’s important – which is how you’re going to comfortably pay for everything which forms part of the life of your growing children. It definitely helps to go into as much detail as possible, but again, the detail which should be entertained needs to be strategically targeted to what’s really important.

Inflation Adjustment

If there’s one area which forms part of your financial planning for your kids’ future in which you can get into as much detail as possible, it is indeed with regards to inflation. The simple truth about it is that you have to adjust your plans for inflation because a dollar will have less spending power than what it can buy today. However, today’s costs such as school fees and the likes make for the logical staring point to see how much of your earnings would have to be allocated to the process of covering the costs for your children’s future.

Financial advisors these days who specialise in financial planning for kids’ futures incorporate inflation adjustment, but they don’t come cheap. It’s probably worth the investment though, unless of course you have the time on your hands to complete the requisite research.

Planning for your contemporary financial circumstances

This perhaps just extends on the consideration of inflation, but things get even more specific with regards to what costs you’ll probably have to deal with later on in your life as opposed to those which you currently have. You need to consider as many of the costs as possible, such as how your kids could perhaps get involved in extracurricular activities which as you know can get really expensive as well.

Would you be able to handle drastic pivots that develop along the way, such as perhaps having to move house because of a new job opportunity which pays more, but that would have implications to the regular dynamics such as how far the kids have to be driven to school, etc?

Savings and investment planning

Finally, as scary as the roadmap ahead may look, the most important part of the equation is putting into effect savings and investment plans which will provide you with the funds you’ll need to carry out the financial plans you’ve made for your children’s future. It’s all good and well wanting to send your kids to that private school you identified, but you’ll need to be able to pay for it in the end.

Investment is obviously better than outright saving, but either way it’s a matter of managing risk very well because there’s very little margin for error here.

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