For a firm future parents of children with special needs should start investing early
This way parents can ensure they can leave behind a financially secure life for their kids
MUMBAI: When 49-year-old Vani Venu, a caterer in Mumbai, found out that her child had autism, she had no idea what it meant. “The doctor asked us to Google the term. Then there was no information or awareness. Our biggest worry was about Pushkala’s safety and well-being, along with finances," says Vani. When Pushkala turned 11, she had to drop out of school because of her irregular sleep cycle, which hindered her classes. The cost of occupational therapies, school and medication was financially stressful for the couple. While Vani’s husband Venugopal, quit a full-time job to become a freelance IT professional and take care of Pushkala (now 21), she started her catering service. According to Chitra Iyer, chief executive officer of Mumbai-based My Financial Advisor, a trustee of Forum for Autism, this is the story of most parents of specially-abled children. “As one of the parents is completely dedicated to looking after the child, the responsibility of running the household rests on the other. Mostly, it is a one-income household where finances are tight," says Iyer.
EDUCATION, MEDICAL, LONG-TERM EXPENSES
Although financial needs vary, mostly it revolves around schooling and medical expenses. Delhi-based Nishtha Dudeja, 21, who was Miss Deaf Asia 2018 in September and was diagnosed with a hearing impairment when she was three, went to a regular school. “In 2000, we used to spend around ₹300-400 for every session of speech therapies, apart from regular medical expenses. After being rejected by other schools, we put her in Kendriya Vidyalaya where the fee was minimal. More than 80% kids with special needs drop out of schools because of the lack of support from institutions, coupled with financial incapacity," said her father Ved Parkash Dudeja, chief engineer (construction), Northern Railway. Dudeja, who is now pursuing a Masters in Economics, is also a lawn tennis player and represented India twice at Deaflympics in 2013 and 2017. “Initially the cost of tennis training was ₹5,000 every month. Later, it was in the range of ₹20,000 to ₹25,000 every month," says Dudeja.
Moreover, the financial needs can be long-term as the child may not be in a position to take up regular jobs later. “Though there is a 3% reservation for persons with disabilities, out of which 1% each is reserved for persons with visual impairment, hearing impairment, loco motor disability or cerebral palsy, in government jobs, there is a dearth of opportunities for people with special needs," said Beverly Lious, co-founder, Mann Centre for Individuals with Special Needs. Thus, parents of kids with special needs have to cater to their and their child’s retirement, and build a corpus to fund child care costs. Here is how you can plan for it:
CREATE EMERGENCY CORPUS
When Dudeja had to participate in Deaflympics, there was a fund crunch. Although her stay was taken care of , her father borrowed from his family to accompany her. However, not everyone gets this support. An emergency fund will give you a cushion to brace an unforeseen situation. Start your financial planning by building an emergency fund. “Parents of kids with special needs are advised to keep nine to 12 months’ expenses as emergency fund. In case of prolonged illness or job loss, child care should not be stopped as it can have life-long implications for the kid," said Jitendra PS Solanki, a Delhi-based financial planner, who advises parents of children with special needs, and is the author of Financial Planning for Special Needs Children Families.
LIFE INSURANCE IS A MUST
You need insurance cover as protection for life and health. Financial planners suggest that parents of kids with special needs opt for a term plan of at least ₹2 crore sum assured. “The corpus has to last for the child’s lifetime. Hence, it is critical for parents to opt for higher term covers, provided their cash flows permit the same," said Iyer. They could also get a life insurance cover beyond retirement. “This will ensure that a decent amount is payable from the insurance company in case of loss of life," suggests Melvin Joseph, founder, Finvin Financial Planners.
ADEQUATE HEALTH COVER
There are no health covers for special kids except the government health insurance scheme Nirmaya. However, the policy is inadequate as the cover is of just ₹1 lakh. “Private insurers have started extending covers for persons with special needs but that, too, only for autism. There is a policy from a public insurer for mental health issues as well. Such policies have waiting periods and are still in the early stages," said Solanki.
As parents, you should take a health cover of ₹7-10 lakh and enhance the cover with a top-up policy, depending on your age and location. “It is difficult to buy a health or life policy for kids with special needs and they are typically on the declined list of insurers. However, if any insurer has issued any policy to you and you develop any mental ailments later on, then it will be covered under the policy," says Kapil Mehta, CEO, Securenow Insurance Broker. It is advisable that you create a separate medical corpus of ₹3-4 lakh for healthcare needs of your child.
INVEST FOR NEEDS
You should also focus on your savings and investments. “for financial needs in the next one to two years, you can invest in liquid funds and bank fixed deposits. For three to five years’ horizon, invest in short-term debt mutual funds. Any requirement for money in five to 10 years, invest 20-35% in equities and rest in debt. For all the long-term needs over 10 years, invest 60-75% in equities," says Solanki. The investment ratio may vary depending on your risk profile.
As the child turns 18, parents need to obtain a legal guardianship to continue making decisions for them. Suitable guardians, caregivers and trustees should be appointed to take care of the child when parents pass away. A legal guardian can be appointed through will or letter of guardianship. A will should be written to ensure the assets built for the child are passed on to the trust. A trust should be created and trustees appointed to safeguard the child’s future. “Parents should write a letter of intent for the future guardian," adds Solanki. A durable power of attorney also needs to be written for situations when parents are not in a position to make decisions for their child.
You can avail a tax deduction if you incur medical expenditure such as nursing, training and rehabilitation for your child. According to section 80(DD), resident individuals and Hindu Undivided Families are eligible to avail a tax deduction of ₹75,000. A higher deduction of ₹1.25 lakh is available if the dependent suffers from severe disability. The tax breaks are too low to benefit a family with a special kid. “The government hardly provides any support for schooling or housing of individuals with special needs," says Iyer, parent of a 20-year-old son with autism and cerebral palsy.