Please wait...

Head Start

‘Hi, I came across this interesting article on the Franklin Templeton website. Check it out!’
Caring for a special need

Coping with a child with special needs isn’t easy. But, you can make a difference financially if you are aware of the hurdles that lie on the way to securing your child’s future and plan accordingly. Long-term planning. Remember, you have to save for two generations-or your own and that of your child-and, at the same time, you must also ensure that financial goals, such as buying a house or securing your retirement years, are not compromised. Risk-reward ratio. Since you need to create an inflation-beating nest egg, it is prudent to take some more risks with your investments. This, in spite of the fact that you are likely to feel more insecure with a specially-abled child to take care of. So, brace yourself and opt for high-risk, but rewarding investment methods. Squeeze on income. Your monthly budget is likely be skewed by regular expenses on your child’s treatment, vocational education and, possibly, the regular cost of employing an attendant. Your capacity to save will not be in line with that of your peers because you may have to manage with a lower disposable income.

GETTING STARTED

There are practical difficulties in bringing up a child with special needs as they require constant care and supervision. This often leaves parents with little time to think about their own and their other child’s financial future. Ideally, you should start planning the moment you detect some kind of permanent disability in your child. Your plan will depend on a host of factors, including your child’s life expectancy, the nature of the disability, his or her future earning potential and housing needs. You also need to factor in issues like medical, educational, vocational and recreational costs. The possibility of financial or other assistance from relatives and friends after your death should also be taken into account.

YOUR BUDGET

First calculate a monthly budget of your child’s current costs. Then take a realistic rate of inflation to extrapolate the expense over the child’s expected lifetime. This is the amount you will need to make available. Next, figure out the investment options that will get you there. Divide your savings according to your child’s short- and long-term needs. During your lifetime, your plans will consist of accumulation and, after your death, you must arrange for an estate plan that will ensure your child gets continued benefits from your assets. 

INVEST IN SKILLS

Disability is no reason to downscale your child’s ambitions-you are sure to find an area where your child can do something special. Invest in developing your child’s skills so that he or she becomes self-sufficient. Also, make sure you give him or her a basic idea of how to manage one’s own finances.

INSURANCE IS KEY

Before you start investing, ensure that all your family members are adequately covered with health insurance. You must also get a life cover that is at least 10 times your annual income, after adjusting for the additional liabilities for your child. There are policies that life insurers have for the benefit of disabled children. An insurance plan that provides annuity payments to the child would fit the bill 

EMERGENCY FUNDS

A child with special needs might have various medical and other contingency expenses that are not always forseeable. Ordinary medical or other insurance policies may not cover these. Keep emergency funds in the form of two-in-one deposits, fixed deposits in banks, and liquid funds. 

CONCLUSION

Forming a trust for the benefit of your child is an option. However, as soon as you start saving for your child, prepare a Will. Spell out clearly what assets you are leaving behind for your child. The executor of your Will can be the person whom you have identified as the future guardian of your child.

Next To Come: Making a Fresh Start