For late parents, time is very important, and so is making a plan with an expert’s help
Money matters suddenly become a big headache for freewheeling couples who embrace parenthood late in their lives. Having a bindaas time with double income can be a boon, and also a curse as Godboles found out recently. In their early 40s, Godboles thought they had a given a pass to parenting, until cherubic Shreya was born last year. The sudden emergence of real responsibility, the prospect of career taking a step back at least for the mother, and the job of planning a secured future of a child who will be just 18 when parents hit 60s can be unnerving. Financial planners tell DNA Money what are the challenges and also the solutions.
Sands of time: Old is a relative term, but older isn't. Couples these days are often becoming parents much later in lives. While these gives them time to focus more on careers and at least theoretically save more, higher disposable incomes often lead to higher expenses. When it strikes them that they are now parents, their world can change. "I have a client in his 50s who has been blessed with a daughter. He had no liquid savings, but bought a couple of properties and other things. It’s now that they need to really sit and structure a solid financial plan. The fact is when his daughter becomes 18, he will be close to 72. When he turns 75, she will be just 21. Time is very important and so is making a plan with help of an expert," says Amar Pandit, founder of wealth management advisory Happynessfactory.in.
Gaping gap: Assuming young parent or a couple having a child in mid or late twenties has huge advantage as he/she/they have enough time to plan for their child's well being as a small contribution can help them achieve their goals in time of requirement. Most importantly, when you start early, your available surplus is also lower than the later years as your income keeps rising gradually.
"A mere Rs 3,000 invested regularly on a monthly basis for 20 years can yield about Rs 44 lakh @ 15% per annum and you will need to invest atleast Rs 16,000 regularly for 10 years to achieve the same target. Thats over five times! Naturally, power of compounding is a very essential tool," says Abhinav Angirish, managing director and founder, InvestOnline.in. Additionally, for late parents in early 40s, other commitments like housing loans and other EMIs are also already committed for. Besides, other expenses like child's higher education, marriage planning also comes up at a time when it is actually the time for them to retire.
Save, invest and plan: Once late couples sit down, they will clearly see the major milestones ahead of them. Child's primary and secondary education, college and higher studies and eventually marriage are the milestones for the child. Side by side, parents will also face their retirement. "However, retirement can be postponed by a few years. Nowadays, 70 is the new 60. What is most important is the amount of money required to attain the child's life milestones or goals. Depending upon their risk profile and present asset/investments picture, parents can take the required risk to achieve those goals. It should not be a difficult task if they are able to plan and execute according to the plan. But yes, the margin of error is small since they are late parents.," says Anil Rego, founder, Right Horizons.
No quick repair: Ideally, many would think and recommend that couples or even unmarried individuals plan for their family regardless of them already having started one. But that easier said than done. When working husband and wife earn fairly good amount of salaries, expenses are high too. "Once a child is born, these couples need have a family budget. This could mean reducing lifestyle spends like trips, buying gadgets and generally spending money at free will. A child is a 25 or 30 year commitment. The expenses will keep growing as they grow up, till they earn and settle on their own. When you marry and have kids early, responsibility comes early as well. Later in life, instilling the same sense of responsibility means tough decisions," says Suresh Sadagopan, founder, Ladder 7 Financial Services.
However, for those couples who have saved, it is definitely easier to change the course. Firstly, balance the family budget. Two, decide on the financial plan for four-five years when the wife/husband will take a break to be a full-time parent. Three, buy protection like life insurance to prepare for unforeseen events.
NEVER TOO LATE
- For late parents, time is very important, and so is making a plan with an expert’s help
- By starting early, your available surplus will be lower than the later years
- Depending upon their risk profile, parents can take the required risk to achieve goals
- Balancing family budget could mean reducing lifestyle spends and extravagancy
- Depending upon their risk profile, parents can take the required risk to achieve goals
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