Special planning for ‘special’ kids

Every child is special.” If you recall, this was the famous tag line of the Oscar nominated Hindi movie, Taare Zameen Par. But if you indeed have a special child, a victim of a mental/physical handicap, the parent’s responsibility doubles. Especially when it comes to finances, parents have to make higher provisions for a special child given that the little one may never be able to earn a living for himself.
“When you think of financial planning for a child, the two major expenses are education and marriage. When it comes to a special child, over and above these conditions, you may have to provide for the income for the entire life of the child. More than the savings, it is difficult to arrive at a ballpark figure to take care of your child, as it may run into over 50 years of planning,” said Swapnil Pawar, financial advisor and director at Park Financial Advisors.
Even if the child could eventually generate income based on his abilities and skill sets, retirement planning should be done in a manner that the child has sufficient means of income through alternative sources.
“However, the margin of error will be significant. For example, if the figure works to Rs 50 lakh, then probably you have to save over a crore to meet your child’s expenses as things can drastically change in 5-6 decades. So, the modality of income generation can be complicated,” Mr Pawar adds.
Where should parents invest?
The investment plan will vary from family to family based on their overall financial situation. There is no silver bullet here. Asset allocation is key and knowing the kind of corpus and returns that you would need for your goals is paramount, experts say.
“As a general rule, a portion of the portfolio should be allocated to equity and this portion could be higher considering the time horizon in such cases (for retirement goal: parents as well as child’s) is more than 30-plus years. Parents should also have exposure to real estate (not as an investment, but as a residence),” said Amar Pandit, a Mumbai-based certified financial planner.
If you have two children, then you should ideally invest in a residence for your special child as housing loan EMI/rent is the biggest expenditure in an individual’s life-time.
“Debt can be added through PPF, EPF and more importantly, LIC’s Jeevan Aadhar (for special children or dependents). This policy provides for guaranteed additions at the rate of Rs 100 per rs 1,000 sum assured for each completed policy year and is a good option parents must consider,” he says.
Source: Economic Times