How to plan finances for a child with special needs

Mayur Desai didn’t think that the happiness on which he was harping for a long time would one day turn into a sad reality, which will live by his side for years to come. Desai’s son was detected with Periventricular leukomalacia, a condition in which areas of brain around the ventricles do not get enough blood. 

“I have done everything I can,” says Desai, with the hint of despair in his voice. 

His son, Nitin, is 10 today, and attends school for special children. 

“Not a stone has been kept unturned. I have met different doctors, have tried various treatments, with a dream that someday Nitin will be able to live like us,” he says. 

Desai’s plight is visible - on one hand he has spent a mini fortune to find cure for his beloved son, and on the other, his finances has taken a toll, the idea that he must plan for his son simply did not occur to him, and this dilemma is shared by many such parents having a child with special needs. 

Also read: How can the education sector cater to children with special needs 

Parents who have limited resources must plan for their children, especially the ones with special needs. On one hand the child, besides care, requires regular therapy sessions, and on the other, there is pressure on finances. The finances, for the present as well as the future, have to be managed in such a way that it does not hinder the growth of a child. 

For Desai, the situation is turning out to be more than difficult. His wife Smitha had to quit her job because Nitin experiences seizure, besides having visual disturbances on a recurrent basis. 

In such a situation, instead of panicking, parents must focus on the financial planning process.

The first step is to identify the budget for the child.

An estimate of fixed monthly expenses can help the parents to estimate the costs for caring on lifetime basis. The key is to factor inflation while computing the budget, for the present as well as future. For example, if the monthly cost for a child is Rs 10,000 per month, then at the rate of six percent inflation, Rs 17,908 will be required each month after 10 years. Hence, it is necessary to create a corpus amount big enough to protect the capital from inflationary pressures. This might seem like a Herculean task, but it is achievable, and where there is a will, there is a way.

The next step is financial discipline.

Desai began to cultivate the habit of saving as soon as he heard about his son’s condition. The sooner you start, the better. The savings portfolio must be balanced, and in case of Desai, he chooses to balance his savings in equities via SIP, recurring deposit with bank, and mutual funds. There will be initial hiccups, but over time, parents will become fiscally prudent. The healthy mix of equities and debt ensures they can beat inflation. 

Also read: This teacher left the US to start an NGO, 35k people with special needs empowered

Many parents try to address their future needs through insurance, but there are very limited options in insurance for a child with special needs. If possible, parents must ensure that the investments they undertake are liquid investments. This makes it easier to create a trust and define their intentions or dictating any other way to take care of a child. It is advisable for parents to take group insurance, sufficient to cover present as well as their future needs. 

Another important area that requires considerations is the possible gaps that can occur unpredictably. To thwart the unexpected, a parent must identify all possible expenditures and balance them with their income. Parents must also strive to reduce their liabilities so that even if one passes prematurely, there won’t be a burden on the other.  

Hence, every parent must create an emergency fund.

Emergency fund helps to tide over when the situation becomes unstable due to unforeseen circumstances. Such fund does not require allocation of huge amount at the outset. If possible, try to set away 10-15 percent from income towards such emergency fund. If you find financial constraints to contribute towards such emergency fund, then you must scale down your expenses, especially the ones that you can do without. For example, you can retire the EMI of your car or avoid planning costly vacations because lack of emergency fund will force a parent to borrow money, which carries high interest rate.  

As a parent, you must stick to your path, no matter what, and discipline is of utmost importance if you want to secure a sound future for your beloved child. Also, make it a habit to conduct periodic review of your financial plan. If there is a deviation, do not fret, and continue on your path to avoid anxiety later. 

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You must also actively plan for transition of your child from young age to adolescence. For this, Desai has hired a teacher to impart special skills to Nitin that helps in his day-to-day activities. It is important that parents do not build sky-high expectation, and encourage their child to interact socially so they won’t feel awkward in social interaction.

You must also create a trust and name the trustee, with clear guidance on caring of your child. Many times, parents make the mistake of appointing the caregiver as a trustee, and this is not appropriate because a trustee is a professional who understands risks associated with managing financial instruments. Another mistake people make is to appoint a family member or a close friend as a trustee to save on fees of trustee. A special child requires special care, and such care is best left to a professional. 

In the end, do not forget to prepare a will, because in absence of will, there could be equal distribution of assets, and this defeats the very purpose of a creating a trust.

Also read: The quest for education – persons with disabilities, severely challenged

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)