Two Financial Gift Ideas for Your Parents That Will Last a Lifetime

Jun 07, 2018 | 5 months ago | Read Time: 3 minutes | By iKnowledge Team

There is nothing in this world that our parents will not do for us. You are the world to them and they would want nothing less for you. It is up to you to show them that you can shoulder responsibility with ease. What better way than to prove to parents that you are a capable adult, than to have a robust and strong financial planning for yourself and the family? It is time to surprise them with gifts of real value.

Gift Option #1: Health Insurance

One of the best financial gifts for your parents can be purchasing a health cover for them when they need it the most – old age. While no one wishes for their parents to fall ill, it obviously pays off to be prepared. Health insurance at their age of depleting funds proves to be an expensive financial burden. Medical inflation in India is growing at 12-14% per annum and the cost of healthcare is increasing year-on-year.

There are some limitations to a medical cover, when purchased after the age of 65. The cover for starters, is not high enough. It may not cover pre-existing diseases for up to 3 years and may attract a co-payment option. A cover of at least INR 15 lakhs is conventional and here are ways that you can go about it.

  • Top-up over the basic cover: Purchasing a smaller basic cover of a minimum of 3 lakh, and then complement it with a INR 10-15 lakh top-up plan works wonders as good retirement planning help for your parents. The initial 3 lakhs will be deductible. Cut back on medical expenses as far as you can afford to and let the top-up cover the rest for you. It is cheaper this way as you are paying INR 10,000/- per annum instead of paying INR 15,000-20,000/- on a base cover for the same time.
  • Nominate for employer’s cover: If your salary includes an employer’s cover, nominate your parents. You can receive good benefits under a subsidized group cover as compared to paying high premium amounts on a senior’s cover plan.
  • Complement employer cover with family floater: Another option in well thought financial gifts for your parents could be buying a family floater plan while retaining the employer cover for your parents. You may even request your employer to increase the plan size by paying a little extra, for obvious reasons. Add to the employer cover with an independent cover for the parent not covered by the employer cover. This way you’ll be able to cover both parents and save tax under section 80D while you’re at it, since premiums up to INR 50,000/- are available as tax deduction.
  • Medical finance threshold: A considerable medical buffer over the span of 3 months to 6 months is just good financial planning. Investing as much as INR 3-7 lakh in a debt or liquid fund will cover up for the rising rate of inflation in medicine on a yearly basis. It even offers a higher rate of interest up to 6-7% as compared to a bank savings account.

Gift Option #2: Acquire and maintain their portfolio

Our parents today, just like most of their generation, are risk-averse and are likely to be indebted with incurring tax deductions in their portfolio. With the limited number of options that were available to them, diversity in their portfolio is certainly limited. Study their portfolio to determine a good strategy to strike the right balance between equities and debt. A simple strategy could be enough to segregate their portfolio into three separate caches:

  • Liquid funds that help meet emergency, liquidity requirements and provide smooth income for up to a year and a half.
  • Debt investments that make up a larger part of the portfolio to stand up against the volatile market of equity.
  • One-fifth of the portfolio should include equity investments to combat rising inflation and add an overall diversity to the portfolio.

A good equity-debt balance can be achieved based on your risk appetite by investing in equity funds and small savings schemes like Senior Citizen Savings Scheme (SCSS) or Pradhan Mantri Vaya Vandana Yojna (PMVVY). These schemes make good financial gifts for your parents.

While your parents may have already invested in various options that were available to them back in their time, rising inflation rates and the current pace of growth in the global economy may prove to be taxing. Without proper planning, they may have to liquidate their hard-earned assets to generate the income that they would need to maintain their lifestyle.

A well-planned retirement can protect your parent’s finances from unexpected expenses and save a considerable amount on taxes as well. Sure, there’s a lot you can do to prove to your parents that you are a responsible adult. But nothing will give them relief and assurance than seeing you take charge of your financial future. Securing theirs as well is just the cherry on top.

Advt. no.: IA/May 2018/3991


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