This Mother’s Day gift confidence to your mom with Financial Fitness
Working from home during this lockdown, has given you a great opportunity to spend time with your loved ones. Why not make Mother’s Day 2020 special for your mom by gifting her something which she will cherish always. Confidence.
In this article, we look at some of the best financial gifts you can plan for your mom.
For illustration purpose only
Regular cashflow for your mother with Liquid Funds
You could make a cash flow arrangement to meet your mother’s requirements over and above that of the household’s. There is a slew of new age instruments that can come in handy for this. For instance, you can supplement the traditional avenues, such as savings bank accounts, by investing in liquid funds and overnight funds, which fall in the lowest risk bracket within the debt fund universe. Liquid funds
Liquid funds and overnight funds have potential to offer better returns compared to savings bank account.
She can withdraw money from these accounts within T+1 basis of placing a redemption request. If the need for cash is regular she can use systematic withdrawal plan (SWP) which enables her to get a regular cash flow into her bank account from her investments. This will help her use the money as and when she needs it.
SWP ensures customised fixed amount credited to your mother’s bank account at specific intervals – monthly, quarterly, half-yearly, or yearly. This plan has now become a better choice than dividend option for investors looking for periodic inflow of returns as Budget 2020 made dividends taxable in the hands of the investor based on the income tax slab he/she falls in. In case of SWP, withdrawal is principal plus capital appreciation. Tax is levied on the gains based on the holding period and the type of scheme.
Plan for her medium- to long-term plans
While we have now met her short-term cash needs, she might also have some medium- to long-term plans. It could be a long planned vacation to her dream destination or a long-pending pilgrimage to a religious place. All these can be achieved if you plan meticulously and invest in the right type of mutual fund instrument keeping her needs in mind.
For instance, if these goals are set with five to 10 years horizon, investments consider investing in hybrid or equity mutual funds. You can start a systematic investment plan (SIP) in equity funds which can be a large-cap fund or
hybrid fund (mix of equity and debt). Smaller amounts invested via SIPs insulate the investment from equity market volatility, average cost per unit through rupee cost averaging and accumulate wealth through compounding over the long term.
Explore few mutual funds options while investing for your mom
Invest in paper gold with Gold ETF Investment
Moms and their love for Gold! Gold has traditionally been the investment of choice for women in India. It has been a good investment hedge (up 43% in the one ended April 30, 2020 and 9%1 in the last decade ended April 30, 2020). However, hoarding of gold is not prudent financial planning. Instead of buying traditional jewellery, this time round invest in instruments such as gold exchange traded funds (ETF) and gold funds.
If your mother insists on physical gold, make her understand that it carries various risks such as storage, theft and impurity. on the contrary, paper gold offers greater price transparency, purity and there are no risks of storage and theft. Also, tell her, while buying jewellery, you even incur an additional making charge.
More importantly, investments in paper gold grow commensurate with the price of physical gold. So, assure her that paper gold retains the glimmer and shine of its physical form.Gold ETFs are passive funds investing in standard gold bullion (99.5% purity) while gold funds of funds invest either in their own gold ETFs or a foreign gold fund, which is the mother fund.
Further, your mother will find redeeming the investment in paper gold more convenient as she can withdraw it as and when required to meet any financial goal. Remember, monetising traditional jewellery could become an emotional issue for those who have believed in physical gold from a tradition and custom aspect. In paper gold, on the other hand, investment is only monetary, not emotional.
Bring out the entrepreneur within her
Most women have high entrepreneurial spirit. This is reflected in how they manage their homes and finances. But, unfortunately, in their haste to fulfil their domestic responsibilities, they sidestep their own aspirations. It is difficult to make good for her loss. Nonetheless, this Mother’s Day you could try to. Have a tête-à-tête with her and understand her enterprising dreams. This could be as small as selling her delicious savories or her handicraft and sweaters. Help her give wings to her dreams. Technology has made our lives easier. Everything, from banking to bill payments to shopping to investments, can be done with the click of a button. Introduce your mother to this digital world so that she can easily transform into a business woman sitting in the comfort of her home. There are many online platforms that will make her financially empowered. She can easily learn to manage her finances without anybody’s help. This will make her happy and give her a sense of accomplishment.
1Gold returns are calculated from London Bullion Market Association (LBMA) prices converted to Indian rupees
Weigh all the options discussed above and offer your mom a financial gift that suits her. Give her confidence.. Let this Mother’s Day be a different one for her and you.
Apart from the aforementioned avenues, you can also protect your mother against any medical exigencies by investing in health insurance plans for her or including her name in the group health cover provided by your employer. You could also schedule regular health checkups for her.
Mutual funds are market-linked investment avenues and hence consider evaluating your mothers’ age, risk appetite and return expectations before investing. Further, prior to gifting or starting investment on behalf of your mother evaluate the historical returns and check factors such as its size, credit quality of the underlying securities, and track record of the fund house.
Disclaimer: Any comparison/data mentioned in this material is for general information only and not intended to be relied upon as investment advice and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Information and content herein have been provided by CRISIL Research, a Division of CRISIL Limited, and is to be read from an investment awareness and education perspective only. Recipient are advised to seek independent professional advice before making any investments. The views / content expressed herein do not constitute the opinions of SBI Mutual Fund or recommendation of any course of action to be followed by the reader. SBI Mutual Fund / SBI Funds Management Private Limited is not guaranteeing or promising or forecasting any returns.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.