The birth of a child in the family is one of the most joyous moments of our lives, it's a celebration of life. Welcoming the new member of our family not only marks the beginning of a new chapter but is also a turning point in our life. Those who have just had a baby or likely to have one in the near future will know exactly what I am talking about.

When you ask new parents if they are really ready for this child, most likely the answer is “if we were not ready and prepared for a child we would not have had one, isn't it?

However, it's not that simple! What happens when a child is born? Most of us are generally short sighted. We feel that we earn well, can afford a good playschool, can afford the best kindergarten and then feel that we can afford good schooling, whether it's an international school, boarding school or a school by the corner of our street. We feel we can afford it and hence we are ready and prepared for welcoming the child.

Here's a truth: Most of us tend to be rather myopic, when we say we can afford it and most of the time we have a 4-5 year horizon in front of us. As a result we by default miss the whole picture. When the child turns 5 or 6 and starts schooling our friendly neighbourhood agent will advice us to do some planning for our child i.e. buy a policy. We get emotionally charged and buy some policy which will give our child some X amount of money when he is age Y and some more when he is age Z so on and so forth. So since we have a child today we have made some planning to provide the child some money in future which is based on our affordability today. This is the most common strategy.

Is this correct? No. It's completely out of order and totally wrong in my professional opinion.

Whether that money will be sufficient, whether it will make sense for the child to receive it at some predefined time, would the money be of much value are questions that generally one does not have an answer to. No matter how much any product manufacturer proclaims there is no single product from any insurance company or a mutual fund that can totally suffice the planning requirements of your child's future!

If you believe or are made to believe that an insurance policy or a unit linked policy or a fund will help you overcome everything that you need for your child you are fooling yourself. You are in for a rude shock and the interesting part here is that you will not know until the last minute before the hurricane hits you. Parents with children in the age range of 12 to 20 know what I am talking about will appreciate this more. At this time parents feel maybe we have not done enough. My previous articles on education planning will also help you understand this point in detail.