The festival of Rakshabandhan is around the corner. The age-old festival provides brothers and sisters a moment to strengthen their bond. It’s also a day when thoughtful gifts are exchanged. The gifts can range from cash envelopes, gift cards, and personal items like clothing, electronics, and perfume. What if you were to move away from these traditional options and consider giving your sibling a financial gift? Here’s a look at some options you could consider.
Buy Them Health Insurance
If your sibling is dependent on you, you could consider bringing them under your own health insurance plan. Check with your insurer about this. Owning a health insurance plan is an absolute necessity. A minor hospitalisation can deplete your sibling’s savings, and a major health episode can cause them immense financial stress. If your sibling is not covered, and cannot be covered under your family coverage as your dependent, then help them buy an independent health plan. You could help your sibling thoughtfully shortlist a robust plan and provide them with a cash gift to help them purchase it.
Buy Them A Term Plan
Rakshabandhan is all about siblings providing each other security. One of the greatest securities you can have is financial security. And one of the best ways to ascertain financial security for your dependents is to own term insurance. Aim to have a sum assured that’s at least 10-20 times your current annual income. In your death, this sum assured with financially protect your family. If your siblings don’t have term coverage, insist they get it, especially if they have dependents of their own. A term plan is one of the cheapest and most effective ways to give your family financial peace of mind.
Help Them Open An Investment Account
If your sibling is not investment-savvy, you could help them open an investment account. This would help them create wealth in order to achieve life goals such as buying a home or retiring early. If they want to invest in the stock market, helping them open a Demat account would be useful. If they’re interested in mutual fund investment, helping them open an SIP account is one of the best things you can do for them. If they’re risk-averse and prefer guaranteed returns, help them open an account in a small savings scheme such as PPF or Sukanya Samridhhi. Of course, you could also give them the seed money to initiate this investment. This gift of cash, of course, will be tax-free in the hands of your siblings or cousins as you’re related.
Pay Off Their Debt
Is your sibling struggling with debt? This is your chance to help them out. You could offer to pay an EMI (or more, if you’re so inclined), or help them make a part payment on their burgeoning credit card debt. If your sibling is repaying a loan, the payment of one additional EMI will go a long way in reducing their interest burden and accelerating the full repayment of the loan. For example, assume you’ve borrowed Rs. 50 lakh for a 20-year tenure at an interest rate of 8.70%. Your EMI is Rs. 44,026. Assume you made a principal payment of Rs. 45,000 at the start of the loan, your total interest dues would come down from Rs. 55.66 lakh to Rs. 53.62 lakh—savings of over Rs. 2 lakh.
Instead Of Consumables, Give Them An Appreciating Asset
Consumables such as perfumes, chocolates, or lifestyle spends such as clothing or electronics have no return on investment. But what if you could give them an appreciating asset instead? Give them the gift of precious metals like silver or gold, whose value would increase with time and aid their wealth creation efforts. You could also help them invest in gold ETFs or gold mutual funds which are capital assets linked to the price of gold but don’t involve possession of physical gold, which means they can earn gold-linked returns without worrying about safe storage and metal purity.
With these few steps, you can help your brothers and sisters create wealth, secure themselves, and get out of debt. One can do no more to achieve financial security.
The writer is CEO, BankBazaar.com