8 Financial Gifts For Your Loved Ones To Give This Christmas Season
Dec 26, 2019

Author: Aditi Murkute

8 Financial Gifts For Your Loved Ones To Give This Christmas Season
(Image source: Iimage by Yvette Fang from Pixabay)

A Roman Stoic philosopher, statesman, dramatist,and humourist of Latin literature, Lucius Annaeus Seneca succinctly articulated, "A gift consists not in what is done or given, but in the intention of the giver or doer."

Christmas is everyone's favourite season of "giving", to spread love and cheer; so why not consider a unique gift to give to your loved ones this year? Something unconventional, perhaps?

The important thing is to give a thoughtful gift which will be deeply appreciated, makes a lasting impact, brings positive change, and strengthens the bond.

(Image source: Christmas vector created by sentavio - www.freepik.com)

Here are some other innovative ways to gift your loved ones this festive season:

  1. Fixed deposit

    A lump sum investment can be done ina bank Fixed Deposit(also known as term deposit) in the name of the person of your choice. The few benefits of investing in bank FDs are...

    • Worthy option when planning for short-term financial goals and contingency needs

    • Thoughtful selection of investment plans/options, cumulative and non-cumulative (i.e. ones that offer regular quarterly or monthly interest pay-outs), can help address the liquidity needs

    • It will earn a higher rate of interest instead of keeping funds in a savings bank account

    • A 5-year tax saver FD can help your loved one in tax saving

    • A bank FD can be booked in a few minutes

    • In dire need of funds, one can prematurely encash their bank FD or take a loan against the FD.

    Similarly, you can even considerRecurring Deposit (RD)under your loved ones name. This will add to their financial security, earn a fixed and higher return vis-a-vis a savings account. Be wise to select a reputed bank with a solid financial standing before parking money.

    [Read: Factors To Look At While Investing In Bank FDs]

  2. Mutual fund investment

    Investing in productive investment avenues in favour of your loved ones can enhance their financial wellbeing. It will be a fulfilling experience for you as well, the giver. Mutual fund investments are potent avenues that multiply the wealth and counter inflation over a longer period of time. These options allow you to invest across categories (equity and debt) and contribute to your loved one's long-term financial goals.

    Some of the advantages are...

    • It offers Diversification (which is the essence of investing);

    • Professionally managed by the fund manager and their investment team who have the expertise and wide experience in capital markets and investing

    • Lower entry-level - you can start investing as little as Rs 500 in mutual funds

    • Facilitate liquidity

    • Offer innovative plans (Direct Plan and Regular Plan) and services (SIP/STP/SWP)

    SIP or Systematic Investment Plan is a promising mode of investing in mutual fund schemes systematically and diligently for your loved ones. It is better than investing a lump sum, as its rupee-cost averaging feature counters the volatility of markets better complemented with the power of compounding for wealth creation.

    Mutual fund investment can also be done in the name of minor children with one parent standing in as guardian.

    Depending on the risk appetite, the investment objective, the financial goal (viz. child's higher education, wedding expenses, etc.), and the time horizon before the financial goals befall, a mutual fund should be selected across categories and sub-categories by assigning weights to each of them sensibly.

    Investment Time Horizon > 10 years 7-10 years 5-7 years 3-5 years 3 years
    Equity 90%-100% 75%-80% 60%-70% 40%-50% 15%-30%
    Large Cap Funds 10%-15% 10%-15% 10%-15% 15%-20% 10%-15%
    Midcap Funds 20%-40% 15%-20% -- -- --
    Large & Midcap Funds 15%-20% 15%-20% 10%-15% -- --
    Multi Cap Funds 10%-15% 15%-20% 10%-15% -- --
    Value Style Funds 10%-15% 10%-15% 10%-15% 10%-15% 0%-10%
    Aggressive Hybrid Fund -- -- 10%-15% 15%-20% 10%-15%
    Debt 0%-10% 10%-15% 20%-30% 40%-50% 65%-80%
    Dynamic Bond Funds 0%-10% 10%-15% 10%-15% 15%-20% 0%-10%
    Short Duration / Corporate Bond Funds -- -- 10%-15% 15%-20% 30%-40%
    Liquid / Ultra Short Duration Funds -- -- -- 5%-10% 20%-30%
    Gold 0%-5% 5%-10% 5%-10% 5%-10% 0%-5%
    Gold Funds 0%-5% 5%-10% 5%-10% 5%-10% 0%-5%
    100.00% 100.00% 100.00% 100.00% 100.00%
    (Note: This table is for illustrative purposes only.)
  3. Gold

    Gold has always been a mark of wealth, looked up to as a safe haven in times of economic uncertainties, and served to be an effective portfolio diversifier. It has always occupied a distinguished emotional value in the hearts of millions of Indians, passed on to generations, and gone on to strengthened family bonds.

    Gold as an asset class is looked upon as one of an important strategic asset class that offers an effective hedge as a safe haven during global uncertainty and a shield against inflation.

    This Christmas, instead of gifting physical gold (bars, coins, jewellery) to children or spouse; consider gifting gold in this novel, smart way -- in the form of Sovereign Gold Bond, Gold ETFs and/or a Gold saving fund.

    SGBs are issued by the Reserve Bank of India (RBI) on behalf of the government at the issue price in denominations of 1 gram of gold and in multiples thereof. These come with a tenure of eight years (with an exit option at the end of the fifth year to be exercised on the interest payment date), and are tradable on the exchange. Until five years, investments in SGBs are subject to lock-in.

    Both, gold ETF and a gold savings fund are smart ways to invest in gold without actually tangibly holding it because you will not have storage concerns or worry about theft.

    Gold ETFs arepassive investmentinstruments that are based on gold prices and invest in gold bullion. Because of its direct gold pricing, there is complete transparency on the holdings of an ETF. Further, due to its unique structure and creation mechanism, the ETFs have much lower expenses as compared to physical gold investments.

    Gold ETF is an open-ended Exchange Traded Fund (offered by mutual funds) which tracks the price of gold and each unit represents ownership of the gold asset. Each unit of gold in the gold ETF that the investor buys is equal to 1 gram of gold (some mutual fund houses also offer 1 unit at 0.5 gram of gold).However, the gold is held on the investors' behalf by an appointed custodian for the ETF.

    Gold ETFs can be purchased on the stock exchanges (demat and share trading account is a must). And when the investor buys gold ETF, it points to a contract indicating his/her ownership in gold equivalent in rupee terms.

    Likewise, a gold saving fund (also known as a gold fund), is a kind of 'fund-of-fund' scheme that invests its corpus into an underlying Gold ETF, which benchmarks the performance against the physical prices of gold. It attempts to provide returns that closely correspond to the returns of its underlying Gold ETFs.

    Investing in gold in paper form can prove to be more effective due to the following benefits:

    • The investor need not worry about storage and security aspect;

    • There's no question as regards the quality;

    • Compared to physical gold, the cost of holding gold in paper form is low.

    [Read: How Gold ETFs Have Rewarded Investors Handsomely Over the Last One Year]

  4. Pay-off liabilities

    Well, this can prove to be an unforgettable gift and a huge relief for your loved ones, to whatever extent you can. By doing this you will reduce/ clear the debt and will save on a lot of interest payments and improve the quality of your dear one's life, allowing them to save and invest more.

    You could help them restructure liabilities, and if you don't possess the competence, guide your loved one to a credit counsellor or a financial guardian. Pay the professional fee and then pave the best corrective course to follow in the interest of their long-term financial wellbeing.

  5. Buying an optimal insurance cover:

    Insurance is for indemnification of risk and protects dependents from a financial loss in the case of an unfortunate event. One should hold an optimal insurance cover for both, life and health.

    The threat of facing a major ailment is always present, considering today's lifestyle of long working hours, stress, lack of physical exercise, skipping meals, indulging in junk food, and so on. This lifestyle is the primary reason that acritical illness coveris required today as it takes care of the rising cost of healthcare.

    A life insurance policy should be bought with the core objective of indemnifying the risk to life in a way that dependents are financially secured. Besides, not having optimal health insurance coverage for every family member may endanger the financial wellbeing if you have to foot a big fat hospital bill.

    So, if you haven't optimally insured yourself or family, you can gift them a health and life insurance cover by paying the premium, it would bea valuable gift. Ideally, life insurance and investment needs should be dealt with separately.

  6. Gift financial board games

    To create financial awareness within your children so that they can learn to manage their personal finances intelligently. Money management is not taught inschools. This is a skill one acquires through observation and home-grown, daily practices.

    If you want your children to be good at money management introduce the concepts to them in piecemeal and help them to refine their skill.One way to impart key money management lessons is to introduce children to a few board games associated with money, such as Monopoly, Game of Life (similar to monopoly), Cashflow (inspired by Robert Kiyosaki's Rich Dad, Poor Dad teaches how to be in better control of your finances), Payday (teaches how to manage monthly budgets), etc.

    This Christmas season gift your children one such game; and as a parent, you can start practicing the values and ways of living that will teach your children. If you want your children to enjoy a sense offreedom and financial independence,ensure that you set the right example as well. They learn most through your experiences.

    [Read: Are Your Spending Habits Influencing Your Children?]

  7. Opening a bank account:

    As a parent you can open a bank account for your child who is about to turn 18 years old. The money you wish to gift can be deposited in this account. This will earn interest; provide the child with a source of income, perhaps pocket money.

    And the bank's debit card can empower her/him to use the money lying in the saving account as and when required.

  8. Gift cards

    Gift cards are prepaid cards offered by banks and widely accepted today at merchandise outlets and online shopping portals. The choice of adding a particular amount is completely yours.

    A gift card can give your loved ones a chance to choose their gift within one year from the date of issue (account of validity).

    However, cash withdrawals are not permitted. You don't need to worry about the security of the money, as a gift comes with a unique PIN, plus it's easy to handle as opposed to cash.

In conclusion...

These thoughtful financial gifts for your loved ones will not only be cherished but will add to their financial security and financial freedom.

Think unconventionally this gift giving season!

Merry Christmas!

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