Raksha Bandhan, the festival of love and affection celebrated by countless siblings across the country, has finally arrived. This much-awaited day is marked by brothers promising to protect their sisters from all evils while sisters praying for the long life of their brothers. And while women often start looking for the best rakhi in town weeks in advance (many also make it on their own), siblings also plan to pick the best gift on this special day.
If you too are in the advance planning stages for a memorable Raksha Bandhan day, here's an interesting suggestion: instead of choosing the same old gifts or just handing out cash gifts, why not go for a financial gift this time around? Such a move will not just come as a pleasant surprise to your sibling, it will also be a meaningful step to secure his/her financial future-something that lies at the heart of the Raksha Bandhan spirit, isn't it?
We have a few suggestions for you (although we love the shirts, perfumes and watches too!).
1. Health insurance plan
One of the best ways to ensure your sibling's life journey doesn't get marred by health complications is to get him/her signed up for a comprehensive health insurance plan. With skyrocketing hospitalisation expenses that can easily exhaust precious savings and investment returns in weeks, a health insurance plan would help in minimising at least the financial impact of health-related issues.
So, buying a comprehensive health plan with at least Rs 5 lakh coverage with cashless treatment facility will not just come to your sibling's rescue if they ever face a health complication, starting the policy young could get a good coverage amount at a cheaper premium. However, do ensure to check for important add-ons like critical illness protection, pre and post-hospitalisation cover, etc., carefully compare all the options and select the policy that best suits your sibling's interests.
2. Mutual fund SIP
Even a small investment made regularly can become a big corpus in the long term. You can start a mutual fund Systematic Investment Plan (SIP) investment in the name of your sibling. If your sibling is self-dependent, he/she can continue paying the future instalments; or else you can pay them on his/her behalf.
In the future, such investments can help your sibling meet his/her financial goals like to buy a motorbike, go on an international trip, etc. for the short-term. And if such investments are continued for a longer period of time, their returns can form the base of bigger financial plans like arranging a down payment fund for a home.
However, complete clarity on how different types of mutual funds work and what are the risks involved is a must before taking an investment plunge.
3. Gold investment
Many women and girls are fond of gold products. So, this Raksha Bandhan, you can either gift gold jewellery or coins to your lovely sister, or invest on her behalf in Sovereign Gold Bonds.
While physical gold can be used as jewellery and an investment, SGBs are free of safety and purity concerns (as they are not physical gold but held in electronic form in the central bank's record books). They also earn assured interest of 2.5% per annum credited semi-annually, with no Tax Deducted at Source (TDS) on the interest earned. However, do note that SGBs come with a minimum lock-in of 5 years and a full tenure of 8 years-as such, if the investment is continued for the long term, the returns can be quite handy for your sibling. Also, you might have to wait for a few months as the next slot to buy SGBs will be before Diwali,
4. Add-on credit card
If your credit card comes with the provision of add-on cards, you can get one in your sibling's name this Raksha Bandhan. An add-on card will not just make your sibling's purchases more convenient, he/she will also be able to maximise the value of their card spends with attractive benefits like cashback, reward points, instant discounts, complimentary travel insurance, etc. depending on your card variant. More importantly, it will teach your sibling a thing or two about financial discipline and savvy money management as he/she will use a card that's linked to your credit card account.
That being said, try and educate your sibling about how credit cards work, why is it important to make the full repayment within the interest-free period, what will be the interest charges and other penalties that need to be paid for late payments, why paying only the "Minimum Amount Due" is not enough, why it should never be used to withdraw cash from an ATM, etc. if he/she is new to the world of credit cards.
We hope you'll like our gifting suggestions as we wish you all a very Happy Raksha Bandhan!
(The author is CEO, BankBazaar.com)