5/9/2016

TheEconomicTimes
Title:MONEYTIPSFORGENSMOMS
Author:RIJUDAVE
Location:
ArticleDate:05/09/2016
Here'showtheSandwichGenerationmothers,whoarecaringfortheirkidsaswellasparents,canplantheirfamily'sfinances.
Motherknowsbest.Inacountrythatrevelsinmomfixation,itiseasytobelievethisadage.Butissheassavvywhiledonningtworolesofamotheranddaughteror
daughterinlawespeciallywhenitcomestofinances?Awoman'sfinancialacumenhasoftenbeenstymiedbysocialmores,whereinherroleisrestrictedtothatofa
caretakerratherthanaprovider.Butthingsarebeginningtochange.
Thepastfewyearshaveseenmoreandmorewomenachievingfinancialindependenceandassuminganactiveroleindecisionmaking.Atthesametime,lifeexpectancyis
goingup,resultinginparentswholivelonger.Ithasrisenbyfiveyearsinthepastdecade,from62.3yearsformalesand63.9yearsforfemalesin20015,to67.3years
and69.6years,respectively,in201115,accordingtotheUnionMinistryofHealthandFamilyWelfare.Consequently,manycouplesintheir30s,40sand50sarefinding
themselvesinapositionthatcanbestbedescribedasa`sandwich'.Theyarecaughtbetweenlookingaftertheirkids'aswellastheirparents'daytodayphysicaland
emotionalneeds,besidesthefinancial,medicalandlegalrequirements.TheyaretheSandwichGeneration.OrGenS,aswe'dliketocallthem.
Idon'tliketheterm`sandwich'.It'saprivilegetobebothaparentandadependabledaughter,saysSwatiPrasad,aDelhibasedmediaprofessional.Butitispreciselythis
deep,emotionalconnectwithbothgenerationsthatcanoftenwaylayone'sfinances.Carriedawaybyasenseofdutyandlove,mostGenSersthinknothingofsacrificing
theirownfinancialgoalstofulfilthewantsandneedsoftheirparentsandchildren.
AsthesewomencelebrateMothers'Day(8May),wededicatethisissueofETWealthtothe.Inthefollowingpages,weshalltellthemaboutthespecificareastheyneed
tofocusonwhileplanningfinancesfortheirkids,parentsandthemselves.Clearly,therules
ofinvestmentdon'tchange.Oneneedstoassessvariousfinancialaspectsbeforeplanningforone'srequirements,beitfundingachild'smarriageortakingcareofparents'
cashflow,saysAshishShanker,Head,InvestmentAdvisory,MotilalOswalPrivateWealthManagement.
Theinvestmentstrategymayremainthesame,butthereareotheraspectsofafinancialplanthattheyneedtoprioritise.Herearesomeofthemoreimportantissuesthey
shouldkeepinmind.
SECUREYOUROWNFUTURE
Focusonretirement
ThisisthemostcrucialgoalforSandwichers,butasitisfaraway,itistypicallyobscuredbytheimmediatewantsandneedsofeitherthekidsorparents.Remember,
however,nottostray.Youcansecureloansforyourchild'seducationandbuyinsuranceforyourparents,butnobodywillofferyoufundsforlifeafterwork.Sokeepaside
yourretirementkittyanddonottouchit,nomatterhowstrongthetemptation.
Wearedefinitelynotdiggingintoourretirementcapitaltofundothergoals.Wehavethesamedutytosecureourownfutureaswehavetoourparents,saysPrasad,who
istakingcareofher83yearoldfatherandparentsinlaw,besideshertwosons,aged11andsix.She,alongwithherhusband,issavingforretirementthrougha
combinationofdebt(PPFandbonds)andequity(mutualfundsandshares)instruments.
Equityisagoodtooltorealiselongtermgoalssinceitoffershighreturnsinthelongrunandtheriskfactorislow.Startsavingforyourretirementassoonasyoustart
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workingandsupplementitwithpensionplans,EPF,PPFandNPSinvestmentstobuildahealthycorpus.Theearlieryoustartandthemoreyouincreasetheinvestment
everyyear,thebiggerthecorpus(seeHikeinvestment..).
Buyinsurance
Sincetheyareearningandhavemoredependants,theGenSwomenshouldmakesuretheyareadequatelyinsuredforlife.ShankerofMotilalOswalagrees:Oneneedsto
planforuncertaintiesandhavingaterminsuranceisaprerequisite.Purchaseanonlinetermplan,whichshouldtypicallybe710timesyourannualincome,buttakeinto
accounttheadditionaldependantsandanyoutstandingloans.
Alsobuyaseparatehealthinsurance,afamilyfloaterplan,tocoveryourspouseandkids.Donotincludeyourparentsorinlawsasitwillpushupthepremiumsinceitis
determinedbytheageoftheoldestmember.Buyaseparatemediclaimplanforthem,iftheyhaven'tboughtitalready.
PritiAgarwal(seepicture),a38yearoldbanker,hasdonewellwhenitcomestopurchasinglifeandhealthinsurance.WhileshestaysinSaharanpur,herhusband,whois
alsoabanker,residesinVikasNagar,70kmaway.So,sheislefttolookafterherdaughter(6)andtwinsons(2.5),aswellashermother(68),motherinlaw(65)and
grandmotherinlaw(85).Ihaveatermplanof`50lakhandmyhusbandhasa`1crorecover.Wealsohavemedicalcoversof`4lakhand`6lakhprovidedbyour
respectiveemployers,saysAgarwal.Thisissupplementedbyasufficientlylargeemergencycorpus.
Itisalsoimportanttobuyanaccidentdisabilityinsuranceplantotakecareofanylossofincomeifyouaretemporarilyoutofwork.
Buildanemergencycorpus
Tobepreparedforeventualitiesthatrequireaneasyandimmediateaccesstofunds,itis
criticaltohaveanemergencycorpusifyourdependantsincludebothchildrenandparents.Ifyoualreadyhaveamedicalbufferforparents,keepacontingencycorpus
equalto36months'ofyourexpenses.Ifyoudon'thaveamedicalcorpus,keepabiggerfundthatisequalto68months'expenses.
Seekouttaxbreaks
SinceSandwichersshoulderanadditionalfinancialburden,theyneedtoincreasetheirsavingswhereverpossible.Onewayistoavailofalltaxexemptionsand
deductions.Theycandosobyseekingthehelpofdependants,beitparentsorchildren,tomaximisetheirtaxsavings(seeHowparentscanhelpslashyourtaxTakekids'
helptosavetax).
Ifyouarestayingwithyourparents,youcouldpaythemrentandclaimhouserentallowance,butmakesuretheirincomeisbelowtheexemptionlimit.Youcouldalsogift
themmoneyandinvestintheirnameastheincomefromtheinvestedamountdoesn'tinviteclubbingprovisionforparents.InvestmoreinequityInvestmentis
individualspecificanddependsonalotoffactorsliketimeframeofgoals,risktolerance,andaccumulatedwealth.Ideally,equityinvestmentshouldhaveatimehorizon
ofoverfiveyears,saysShanker.SincemostGenSershavelongtermgoalsofwelloverfiveyears,beittheirchildren'shighereducationexpensesorretirement,itis
advisabletofullyutilisethegrowthpotentialofequityasitistheonlyassetclassthatcanbeatinflation.Also,itisbesttoinvestinequitynotthroughstocks,butmutual
fundssincetheyhelpdiversifytheriskbyinvestinginvariousstocks,andaremanagedbyprofessionals.
About78yearsago,wehadanassetallocationthatwashighlyskewedtowardsdebt,butonrealisingthatlongtermequityinvestmentscanofferhigherreturns,we
shiftedmostofourinvestmentstoequity,saysBharathiMani(seepicture),41,aBengalurubasedsoftwareprofessional.Alongwithherhusband,sheistakingcareofher
inlaws'basicandmedicalneeds,besidescaringfortheirtwokids,aged15and12.Sheisrelyingmostlyontheirequityinvestmentsinmutualfundstorealisethekids'
educationgoalsaswellastheirownretirementgoal.
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ThisisalsoanadvisethatGhaziabadbasedAparnaChaturvedi(seepicture)canbenefitfrom.Themotherofanineyearold,wholooksafterherparents,says,Allour
investmentsareindebtbecausewefeelsafeintheseinstruments.It'stheriskfactorofequitythatwewanttoavoid.Itistimesheshiftedachunkofherportfolioto
equity.
TAKECAREOFPARENTS
Buyhealthcover,keepmedicalbuffer
OneoftheprimaryconcernsoftheGenSmothersisthehealthproblemsoftheirparentsorinlaws.TakePrasad'sfather,whowasdiagnosedwithParkinsonismin
2006.Whenheretired,hedidnothaveanindependenthealthplan.Hefoundmedicalinsuranceveryexpensiveandchosenottobuyit,saysPrasad.Thisisthereason
sheandhertwosiblingshavebeensharingthecostofhismedicalcare,attendantsandsurgerieseversince.
Forageingparents,medicalincidentalsformalargepartoftotalcostinretirement.Soinsuranceisinevitableandcrucial,saysShanker.Giventhe1520%risein
healthcareinflationinIndia,medicalcostscaneatintothesavingsandbuyingfreshinsuranceatthatageisprohibitivelyexpensive.Soensurethatyourparentsare
coveredbeforetheyretireordevelopmedicalcomplications.Youwillevenbeabletoavailofataxdeductionof`30,000ifyoupaythepremiumforyourparents'(above
60yearsofage)healthinsurancepolicy.
Ifparentsdon'thaveinsuranceanditisnotpossibletoinsurethem,createamedical
contingencyfund,saysfinancialplannerPankaajMaalde.Iftheinsuranceamountislow,buyatopupcover,whichisutilisedonlyafterathresholdordeductiblelimit,
andischeaperthanaregularplan.So,ifyouhaveabasicmediclaimof`5lakhandbuyatopupcoverof`10lakhwithadeductibleof`5lakh,thebasepolicywillcover
theexpensesof`5lakhandthetopupplanwillcomeintoplayafterthis.
Managetheirpostretirementfunds
Itgoeswithoutsayingthatretireeshavefullfaithindebtwhenitcomestoparkingtheirlife'ssavings.Whiletheexposuretoequityshouldbecutastheyapproach
retirementtoprotectagainstvolatility,rememberthattheynolongerhaveanincome.Sothecorpusneedstogrowataratethatcanbeatinflationandlastseveralyearsinto
retirement.
Theparents'reservesareloadedintraditionalsavingsaccounts,fixeddepositsorlowyieldschemes.Theseneedtobechannelisedintohighyieldingassets,says
Shanker.So,itisadvisabletoput1520%oftheircorpusinequities,preferablythroughmutualfunds.Diversifiedequityfundsorbalancedfundsaregoodoptionssince
theyofferstabilityevenastheyallowgrowth.
ThedebtcomponentcanbeinvestedintheSeniorCitizenSavingsScheme,whichcurrentlyoffersarateof8.6%(seetable).Ifregularincomeisapriority,theycould
alsooptforPostOfficeMonthlyIncomeSchemes,whichofferarateof7.8%,saysfinancialplannerJayantPai.
Handletheirpaperwork
Mostseniorcitizensprefertomanagetheirownfundsanddocumentsafterretirementtoretainindependence,sotreadwithcare.Offerhelpwhereneeded,withoutforcing
youropinionsorsuggestionsonthem.Mydadinlawdealswithhisowninvestments
andcorpus.Heisverymeticulousabouthisdocumentsandalsoindependent.Sowedonotimposeonhim,saysMani.
Sincethisisasensitiveissue,thetwogenerationsshouldsitdownandconsultinsteadofonepartyhavingitsway.Itwillonlyaddtostressifthisisthecase,saysPai.
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Myfatheralsolikestohandlehisownfundsthoughheisunabletogotoabank.Sowerenewthedepositsorschemesperiodicallyforhim,addsPrasad.
So,renewtheirpoliciesanddeposits.Haveanoccasionaltalktokeepthemupdatedonfinancialdevelopmentsintaxationorchangeofsavingschemes'rates.Respecttheir
financialdecisionsandaskthemiftheyneedanyhelpwithinvesting,withdrawalsorplanning.Mostimportantly,keepthemuptodatewithfinancialscamsandmisselling
ofpoliciesandschemessinceseniorcitizenswithfatcorpusesandlackofawarenessarethesoftesttargetsforscamsters.
Helpthemmakeawill
AnotherstickyareaforSandwichersisbroachingthesubjectofestateplanningwiththeirparents.Myfatherdoesn'thaveawill,butitisasensitive,difficultissueandso
wehaveneverbroughtitup,saysChaturvedi.Ontheotherhand,Agarwal'smotherandmotherinlawhavebothdrawnupthewills,ensuringthattheassetsarepassedon
totherightfulheirs.
Itisindeedcrucialthatthesubjectbedealtwithsinceitcanleadtoalotofunnecessarylegalhassleslateronandunduecomplicationsinthetransferofassets.Besides,
makingawillisnotanoneroustask.Yourparentscanwritethewillonplainpaper,notnecessarilyonastamppaper.Whileitisnotmandatorytoregisterit,itisadvisable
todoso.Itshouldalsobesignedinthepresenceofatleasttwoindependentwitnesseswhoarelikelytooutlivethem,andshouldbesignedbythem.Theyshouldalso
mentiontheexecutorwhowillensurethattheirdirectionsarecarriedout.Thedocumentcanbealteredatanytimeinthefuture.
PLANFORKIDS
Startsavingearlyinequity
Sincemostmothersarepassionateabouttheirchildren'sgoals,thebestwaytoensurethattheyreachthesewithoutriskingtheirowngoalsistostartinvestinginequityas
earlyaspossible.Thebestoptionofcourseisinvestinginmutualfundsthroughsystematicinvestmentplans(SIPs).
Sincekids'goalsofeducationandweddingsarebackended,onecanlayoutaregularanddisciplinedinvestmentplan,saysShanker.Infact,theearlieryoustart,the
lesseryou'llhavetoinvestinlateryears.ItisalsoadvisabletoincreasetheSIPwithariseinincomeeveryyeartoeasetheburdenofinvestinglargesumsclosertothe
goals.BothIandmyhusbandhavededicatedmutualfundSIPstofundourchildren'sgoalsofeducationandweddings,saysAgarwal.
Letthemtakeeducationloans
Whenitcomestochildren,`sacrifice'isthemiddlenameofthetraditionalIndianmother.However,it'sbeingdiscardedinthefaceofreality.Thoughmumsstillmake
everyefforttosecurethekids'future,theyarenolongerwillingtojeopardisetheirretirement.
Withpensionablejobsdryingoutandeducationinflationsoaring,itistherightapproach.Ifmykidsplantogoabroadanddependingonthecollegetheychoose,ourfirst
optionwillbescholarships.Ifthatisnotavailableandourfundsarenotsufficient,educationloansarethenextoption.Weshallnotdipintoourretirementcorpusaswe
wantsecurityinouroldage,saysMani.
Ifyourunshortoffunds,optforeducationloanssincethesearetypicallyavailableatgoodrates.Besides,theyhelpinculcatefi
ancialdisciplineandsenseofresponsibilityinthechildsincehehastorepaytheloanongettingajob.
Letkidsfundtheirownweddings,partially
ThisisanotherchangeofattitudethatistakingrootinGenSmothers.Whilewewilltrytogivethebesteducationtoourkids,wearenotsavingfortheirweddings,says
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Prasad.AddsMani:Whentheydecidetogetmarriedandreachoutforhelp,andweareinacomfortablepositiontoprovideit,weshalldoso.Asofnowtheirweddings
arenotourgoals.
Thisisasitshouldbe.WiththefinancialstrainofcaringforkidsandparentsclearlyshowingonSandwichers,itisaprudentmovethatwillmakechildrenhandletheir
ownfinancesmoreconscientiouslywhilerelievingtheparentsofanadditionalfinancialburden.
Teachthemfinancialplanning
Thisonestepwillgoalongwayinsecuringyourchild'sfutureandensuringthathedoesn'tleanonyouforfinancialassistanceasanadult.Startearlywiththetraining,
whenthechildisfiveorsixyearsold.Ihavealreadystartedwithsmallstepslikeopeningabankaccountforherandgivingherpocketmoney.Iencouragehertospend
someamountanddeposittherestinheraccount,saysAgarwal.I'mteachingmydaughteraboutsavingandnotwastinghardearnedmoney,addsChaturvedi.
Continuethiseducationtillthechildis16or18yearsold,enhancinghisknowledgeabouttoolsofinvesting,savingsandtaxation.
Pleasesendyourfeedbacktoetwealth@timesgroup.com
TAKEKIDS'HELPTOCUTTAX
INVESTINTHENAMEOFMINORCHILD
Ifyouinvestinyourminorchild'sname,theincomeearnedwillbeclubbedwithyourincomeandtaxedundertheclubbingprovision.However,youcouldavailofasmall
exemptionof`1,500perchild,peryearforamaximumoftwochildren.Thismeans,youcaninvest`15,000inafixeddepositinyourchild'sname,andfortwokids,this
amountcanbe`30,000earningtaxfreeincomeeveryyear.
INVESTINTHENAMEOFANADULTCHILD
Afteryourchildturns18,heistreatedasaseparateindividualasfarastaxationisconcerned.Thismeansthatifyougifthimmoneyanditisinvested,theincomewillbe
consideredhisearningandwillbesubjecttothesameexemptionsanddeductionsasanyotheradulttaxpayer.Itwillnotbeclubbedwiththeparent'sincome.Thismeans
thatifhisincomefallsbelowthebasicexemptionlimit,youcouldearntaxfreeincomeoninvestments.Anincomeofupto`2.5lakhayearwillbetaxfree.
RAISEYOURINVESTMENTLIMITINTHEPPF
IfyouhaveexhaustedyourSection80Cexemptionlimitthroughotherinvestments,youcouldseparatelyinvestupto`1.5lakhayearinyourchild'sPPFaccount.
However,underclubbingprovisions,theinterestincomewillbeclubbedwiththatoftheparentandtaxed.
TAXBENEFITSFORMEDICALTREATMENTORFORHANDICAPPEDCHILD
UnderSection80DDB,youcanclaimtaxbenefitformedicalexpensesincurredforyourchild.Theamountis`40,000ortheamountactuallypaid,whicheverislesser.This
isonlyforspecifiedillnessesorailments.Also,underSection80DDA,youcouldclaimdeductionformedicalexpensesincurredforadisabledchildbetween`75,000and
`1.25lakh,dependingonthelevelofdisability.

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