A complex challenge of inflation

Rising cost of living has put parenting skills to test
A complex challenge of inflation
Today the situation on the inflation front is more complex as the companies manufacturing various products have expressed their inability to absorb rising input costs. [Representational Image] File/ GK

Soaring cost of everything, from fuel to small child care items, has pushed a household to the wall. There is a Covid-induced radical change in the consumer behavior as their established shopping patterns are succumbing to the rising inflation.

They have been forced to cut costs on their living by reducing the quantity of staples, switching to cheaper brands and looking for deals offering discounts.

In other words, over a period of time, the household staples have no longer remained immune to the uncontrolled inflation as input costs for companies remain rising amid the twin catastrophes of pandemic-induced lockdowns and now the Russia-Ukraine war.

Today the situation on the inflation front is more complex as the companies manufacturing various products have expressed their inability to absorb rising input costs. Most of them have already loaded the burden of input costs in their products and finally it’s the consumers who have to shell out more for less.

A report said companies from the Indian units of Unilever Plc and Suzuki Motor Corp. to homegrown JSW Steel Ltd. are revising prices in response to the global supply squeeze made worse by the surge in energy costs following Russia’s invasion of Ukraine. Higher retail fuel prices also added more woes to the consumers.

Precisely, the overall scenario has led to the rising cost of living. Household savings have already suffered and the decline in savings was due to a significant weakening in the flow of household financial assets, which more than offset the moderation in the flow of household financial liabilities.

Here it makes sense to state that the pandemic has exposed scores of loopholes in our way of living, managing and shaping our future. However, at the same time this unprecedented crisis has placed some important financial lessons, which can help us to safely navigate any future crisis.

In other words, the situation has, among other things especially in the health sector, prioritised money management skills as an arsenal to stay afloat in difficult times.

Meanwhile, soaring inflation triggering rising cost of living has put parenting skills to test. The dip in financial health owing to COVID crisis coupled with the Russia-Ukraine war has a direct bearing on the future of their children. Looking at responsible parenting through the prism of economic and financial angle makes sense today as we are experiencing the worst economic scenario around us. This is the time to introspect where we stand in line with the future prospects of our children.

Is the future of our children secure amid the rate at which cost of living is increasing? It was totally a different ball game when our parents used to think about investing for our future. It has changed with the times. Let us take the cost of education.

These costs were not as mind blowing during our times as they are now. And the circumstances suggest that they are slated to assume still more humongous proportions in the coming times. Rather, educational costs will grow at a rate – far higher than inflation, as the participation of the private sector in higher education will continue to increase and the growth of education funded by the government will remain less than required.

So, we as parents should not be surprised if costs multiply by four to five times by the time we need to reach out for meeting our child’s higher studies expenses. So, it is quite evident that securing our kids’ future is no longer child’s play.

Given the low level of financial awareness in our state I wouldn’t be surprised if many of us fall short of funds while negotiating the cost of securing the future of our kids.

For a government employee dipping into his retirement savings, as many of our parents did, will cripple his retirement funds, ruin his standard of living after retirement and there is every possibility of ending up becoming a financial burden on his children.

Precisely, it is absolutely critical for today’s parents to plan judiciously and proactively, so that resources are available for the child’s most important academic goals as they may come at a time when it may be difficult to start saving afresh.

The moment a child is born, the letter of the law makes parents responsible for bringing the kid up. And it is the financial aspect which parents should, ideally, see to it that the child is provided for even if parents die before the kid is old enough to fend for him or herself.

We know, a newborn is a bundle of joy for everybody, more so for his parents. But this bundle of joy means new responsibilities for the parents. So, it’s best to start getting a fix on the money needed right after the child is born.

The first step to start saving for a newborn should be to open a savings account, or a recurring account, to park savings and cash gifts. Several banks offer savings accounts exclusively for children. Don’t ignore the fact that your kids and expenses grow together. When your kid is mature enough, link his pocket money to a savings bank account.

Remember, the ideal time to start planning is when your child is born. School fees may not be a big burden, but it’s for your child’s college, higher studies and marriage that you would probably need to save for in advance. And the sooner you start, the better it is.

The reality is that when you start planning for your child early, you have time on your side—ideally, around 18 years before your child is ready to go off to college. Notably, to realize the secured future of our kids, unlike our parents, we can no longer bank on lower risk investment options or fixed-income options since the current pace of price escalation reveals that growth of our investments will be terribly affected by inflation.

One can also bank on insurance schemes like term life policy etc. which can be used not just for protection, but also as an investment option. Life insurers provide a wide range of instruments through which you can invest for your child.

There are certain investment plans which inculcate discipline in the parents to invest regularly to build a corpus. However, the ideal way to build an adequate amount for your child’s future is to go step by step.

You also need to stop along the way occasionally to make sure that things are happening in the right direction and as planned by you.

In short, whether it is living our aspirations through our children or helping them pursue what they want, parenting is all about giving wings to dreams. Finding a way to fund the dreams of our children in a changing world will always remain the cornerstone of responsible parenting.

Lastly, as experts have pointed it out, inflation woes seem a bigger challenge than growth over the coming quarters. There is a need to come out with out-of-the-box monetary policy tools.

Let’s hope the first bi-monthly monetary policy of 2022-23 scheduled for April 6-8, takes the inflation pressures head-on for the benefit of common consumers.

(The views are of the author & not the Institution he works for)

Disclaimer: The views and opinions expressed in this article are the personal opinions of the author.

The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.

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