8/2/2019 Play the Game of Finance

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[COVER STORY]

[18 ] O U T L O O K M O N E Y 2 5 F E B R U A R Y 2 0 0 9

THE GAMEPLANPLAN

FIRST SIXMONTHSOpen a kids bankaccount for cashgifts. Include yourbaby in your healthcover. Make him thenominee in all yourinvestments. Makea Will if you haventdone so yet; appointexecutors. Thechilds income, ifany, will be clubbed

with a parentsunless the child hasan income of hisown (for example,

as a model).

YEAR TWOTheres still timeto catch up on the must-dos. Try max-ing the PPF account and continue

with the term plan and the kids Ulip.Deposit small amounts in the childs

bank account.

YEAR THREEYour family income wouldhave gone up now. Catch up if you are still lagging

on the must-dos. Continue the existing invest-ments, try to max PPF, top up the kids Ulip andadd on to your MF portfolio. Continue saving forschool entry expenses.

YEAR FOURDiversify the kidsportfolio further byincluding individualstocks with a mixof large-, mid- andsmall-cap stocks thathave performed con-sistently. As this port-folio and your otherinvestments grow,keep updating yourWill so that it ear-marks the assets forthe child to ensure a

seamless transfer incase of your prema-ture demise.

YEARS SEVEN TO 10Continue bumping up the inputs in theexisting investments by diverting parts ofbonuses, dividends and increments to thekids portfolio along with cash gifts.

YEARS FIVE & SIX Continue with the olderinvestments and invest parts of bonuses, dividends andincrements. Buy gold ETFs, if you havent done so yet, upto 2-5 per cent of the portfolio. Augment large-cap stocksin the direct equity portfolio. Buy a separate health coverfor your child or bump up your family floater cover.

YEAR 12Even as you contin-ue investing, make

your child money-savvy by linking hispocket money tohis savings accountbalance.

YEAR 11Maintain the mo-mentum in savingsand investments.Educate your childon debit cards,chequebooks andinitiate her into

online educationalresources on money.

GAME BOARD

YEARS 15-16 Systematically move 60 percent of the Ulip and MF portfolio into fixed incomeoptions such as long- and short-term debt funds.Switch from high-risk equity to low-risk debt-based

variants in the kids Ulip. Shrink the stock portfolio;first sell aggressive stocks and then the defensiveones. Extend the PPF account.

YEAR 18Use fixed income options otherthan PPF. If all sources, including loans, fall short,and the markets are depressed, make partial PPF

withdrawals. Else, dip more into equity invest-ments. Update Will. A childs income will now betreated as his own. Help in tax filing.

YEAR 14Continue PPFinvestments.Update the Willregularly. Assessthe childs needsfor the next few

years. Go for fixedincome and liquidoptions for re-investment. Avoidlong-term avenues

with strict lock-inssuch as Ulips.

S P E C I A L

YEAR 13With the countdown for the use of

kids money on, start deriskingthe portfolio. Begin moving

from mid-cap stocks tolarge-cap defensive

stocks.

YEAR 22 ONWARDSInvestments made in the childsname can be passed on to her. Usegold investments at the time ofher marriage. For investments thatare in your name but made for her,make a plan for their transfer. Keepupdating the Will if you make

further investments.

YEARS

19-21 Assesshigher study needs.You can seek onemore extension ofPPF.Derisk theportfolio further, ifneeded. Shift intodebt funds (giveslong-term capitalgain advantage)and fixed deposits.Bump up portfolio

with windfalls.

YEAR 17With target age

within strikingdistance, you wouldnow know whetherthe money savedfor the young turk

would suffice. Ifyou are fallingshort, look at

educational loansinstead of tappinginto your retire-ment funds.

NEW BORNIncrease life cover through a

term plan. Increase emergencymoney according to your new

responsibilities and needs.

An important part of taking care of a child is being able to take care of his financial needs, especially educationand marriage. A systematic approach makes the task easier. Heres an easy-to-play game that makes everyone a winner

BEFORE YEAR ONEIdeally,start a PPF account in the kids name.You can use money from the kids bankaccount as initial deposits. Make growthinvestments in large-cap equity mutualfunds (MF) via systematic investment

plans (SIP) or inexchange-tradedfunds (ETF). Buya kids unit-linkedinsurance plan(Ulip). Chooseits highest equity

option and premium waiver rider.Begin giving a gold coin or biscuit asa regular birthday gift. Later, you cansupplement with gold ETFs. If schooladmission will need a lump sum, startsalting away now in suitable debtfunds and later in fixed deposits.

Graphics: MANOJITDATTA;Image courtesy: PHOTOSINDIA.COM