Financial Planning for Kids with Special Needs

Financial planning for families is crucial, but it becomes even more essential when you have a child with special needs. If you have special kids, you cannot afford to miss financial planning for special kids. In this article, we cover wealth management for special needs, how to take care of financial well-being for special kids, savings plans for special needs, and much more.

Importance of Financial Planning for Special Kids

Financial planning for special kids is crucial for many reasons. Let us look at the importance of special needs planning in detail:

Securing the Future:

The goal is to support the financial needs of disabled kids, allowing them to live a fulfilling life with dignity and potentially reduced reliance on others. Special needs often require ongoing care and support throughout life. Taking care of the financial needs of disabled kids ensures there are resources available to cover these costs. Investing in your child’s education and training equips them with skills for potential employment or independent living, increasing their self-sufficiency.

Peace of Mind:

Financial planning helps ease the financial burden on the family, especially after parents are no longer around to provide support. Knowing you have taken care of special needs planning, you know your child will have the financial resources for continued care. It provides peace of mind and reduces worry about their well-being. You focus on enjoying the present with your child and creating lasting memories rather than constantly worrying about the future.

Legal and Financial Safeguards:

A trust can hold assets for your child’s benefit while ensuring they remain eligible for government benefits. It allows you to designate a trustee to manage the funds and ensures responsible use of the money for your child’s specific needs.

Understanding the Financial Needs of Special Kids

Now that you know why financial planning for special kids is essential, we move to understand the financial needs of disabled kids. Here are different needs you must plan for:

Lifetime Care Costs: These include expenses for food, clothing, housing, transportation, and personal care assistance. Also, depending on the level of care needed, residential facilities or in-home caregiving can be significant expenses for parents. Specialized mobility equipment, communication, or daily living tasks can be costly.

Educational Expenses: Children with special needs may require specialized schools, therapists, or educational resources that can be more expensive than traditional education. Investing in vocational training or skill development programs can empower children for potential employment and greater independence.

Medical and Therapy Costs: Special needs often involve regular doctor visits, medications, and specialist consultations, leading to significant medical expenses.

Key Considerations for Financial Planning

Here are a few considerations you cannot overlook while doing special needs planning:

• Understand Government Benefits: Research and explore various government schemes and benefits available for the financial well-being of special kids. Eligibility criteria can vary based on the specific program and the severity of the child’s disability.
• Legal Instruments: You must understand and learn how to utilize trusts, wills, and guardianship arrangements.
• Insurance Needs: Having a comprehensive health insurance plan is crucial for covering medical expenses associated with a child’s special needs. Also, life insurance provides financial security for your child in case of your unfortunate passing. The death benefit can be used to cover their care expenses and ensure their well-being is not compromised.

Investment Strategies for Special Needs Planning

Wealth management for special needs is different compared to traditional investing. The investment strategies for this case differ. Here are strategies for special needs planning:

Diversified Investment Portfolio:

Balancing risk and growth is crucial. You want your investments to grow over time to meet your child’s future needs, but you also need to manage risk to avoid losing a significant amount of money. The asset allocation depends on your risk tolerance, investment timeline, and child’s needs.

Tax-Deductions:

You can use Section 80DD which provides deductions for individuals who incur expenses on medical treatment (including nursing), training, and rehabilitation of a dependent (which include children) with a disability.

Here are a few key points to know on the deductions:

Eligibility: You should be a resident individual or Hindu Undivided Family (HUF) incurring expenses for the medical treatment of a child with a disability.
Disability Certification: The dependent must have at least 40% disability certified by a medical authority.
Deduction Amount:

•  Fixed Deduction: Rs 75,000 yearly for dependents with at least 40% disability.
• Severe Disability: Rs 1,25,000 yearly for dependents with 80% or more disability.

Long-Term Investments:

The financial needs of a child with special needs are typically long-term. Therefore, focus on investments with long-term growth potential, such as low-cost index funds or globally diversified mutual funds.

Steps for Effective Financial Planning

Next, we look at steps you need to follow to ensure financial well-being for special kids:

• Assessing Financial Situation: Start by gathering information about your current income, expenses, debts, and assets. It helps create a baseline understanding of your financial standing.
• Setting Financial Goals: You should define clear and achievable goals. For example, aim to save a specific amount of money monthly for your child’s future care. Set short-term goals like building an emergency fund to cover unexpected expenses. Also, establish long-term goals like accumulating enough funds to cover your child’s future care needs or education expenses.
• Developing a Financial Plan: Develop an investment strategy based on your risk tolerance and your child’s needs. Consider savings plans for special needs – diversified portfolio with long-term growth potential and explore tax-advantaged options like 529 ABLE accounts or special needs trusts. Creating a detailed plan with the help of a financial advisor.
• Regular Reviews: Regularly review your financial plan and monitor your progress toward your goals. Be prepared to adjust your plan as your child’s needs evolve, your financial situation changes or economic conditions shift.

Conclusion

The goal was to show you that financial planning for special kids is essential. We hope we have been able to showcase that. We also covered a high-level approach to help you understand how you can ensure the financial well-being of special kids.
Before you leave, we request readers to start understanding the financial needs of special kids early and start planning for the same without delay. You should consult experts for the best results. Get in touch with experts from Right Horizons for personalized financial planning services.
For more information on Financial Planning for Kids with Special Needs, watch our latest webinar for expert advice.