A parent with a special child would be keen on ensuring a secure future for their child. This would require shoring up the finances that last beyond one’s life to care of the child’s needs. The same approach would be applicable for any person who has special needs stemming out of physical or mental health issues.
The expenses for the all round health of a special child can be very high and can adversely affect the family financials if not planned. This involves planning for multiple lives on the same pool of financial assets.
How To Ensure Lifelong Care For A Child With Special Needs?
One needs to plan as soon as it becomes known that the child has special requirements. A detailed plan needs to be prepared, keeping in view the nature of ability, life expectancy, future earning potential. The financial plan needs to be brought together with the personal financial plan of the parents.
7 Steps to Financial Planning for Children with Special Needs
- Budget
- Insurance
- Emergency Fund
- Retirement Planning
- Estate Planning
- Strengthen And Invest In Skills
- Devise a Simple Investment Plan
1.Budget
Draw up an estimate for the amounts required to meet the therapy, schooling and other activities and the cash flows required in future to meet his financial needs considering longevity and inflation.
2.Insurance
Check for the health insurances especially aimed at special need children. While it may not cover all the expenses, budget should take care of the balance. Parents must also get life cover higher than normal.
3.Emergency Fund
Plan an emergency fund which can be easily liquidated to meet contingent expenses.
4.Retirement Planning
Do not lose focus on your retirement plan. As the aircraft safety warning goes, ensure your oxygen mask is in place before attending to your child. This plan has to be a comprehensive retirement plan taking care of your and your dependent special needs children.
5.Estate Planning
Have a detailed estate plan so that your child continues to benefit from your assets when you are not around. Creating a will, appointing a guardian, forming a special needs trust and assigning the trustee are the things to be considered for the financial plan.
6.Strengthen And Invest In Skills
Disability of child should not become a hurdle in pursuing a career by the child. Recognise the skill in your child and invest on it to make him self reliant. It is important to educate him on financial matters.
7.Devise a Simple Investment Plan
Ensure that the corpus planned is invested in a suitable mix of fixed income and equity instruments. Going 100% fixed income with the intent to minimise risk may actually have the opposite effect. It may increase the chances of the corpus not keeping up with inflation. Hence a simple combination of equity index funds (direct plans) with debt mutual funds is suggested. The equity allocation depends on the situation but atleast a 10% to 25% range might work in most cases.
Conclusion
Financial planning for special needs children is not easy especially when you are emotionally struggling. You have to be proactive and address the need for a solid financial plan to ensure physical, financial and emotional well being of the child. Consult a SEBI Registered Investment Advisor because this assures you of zero commission, compared to a certified financial planner.