[ COVER STORY ] GAME BOARD

SPECIAL

THE GAME PLAN

NEW BORN
Increase life cover through a term plan. Increase emergency money according to your new responsibilities and needs.

An important part of taking care of a child is being able to take care of his nancial needs, especially education and marriage. A systematic approach makes the task easier. Heres an easy-to-play game that makes everyone a winner
YEAR 13 YEAR 18 Use xed income options other

FIRST SIX MONTHS

Open a kids bank account for cash gifts. Include your baby in your health cover. Make him the nominee in all your investments. Make a Will if you havent done so yet; appoint executors. The childs income, if any, will be clubbed with a parents unless the child has an income of his own (for example, as a model). With the countdown for the use of kids money on, start derisking the portfolio. Begin moving from mid-cap stocks to large-cap defensive stocks. than PPF. If all sources, including loans, fall short, and the markets are depressed, make partial PPF withdrawals. Else, dip more into equity investments. Update Will. A childs income will now be treated as his own. Help in tax ling.

Your family income would have gone up now. Catch up if you are still lagging on the must-dos. Continue the existing investments, try to max PPF, top up the kids Ulip and add on to your MF portfolio. Continue saving for school entry expenses.

YEAR THREE

YEARS
start a PPF account in the kids name. You can use money from the kids bank account as initial deposits. Make growth investments in large-cap equity mutual funds (MF) via systematic investment plans (SIP) or in exchange-traded funds (ETF). Buy a kids unit-linked insurance plan (Ulip). Choose its highest equity option and premium waiver rider. Begin giving a gold coin or biscuit as a regular birthday gift. Later, you can supplement with gold ETFs. If school admission will need a lump sum, start salting away now in suitable debt funds and later in xed deposits.

BEFORE YEAR ONE Ideally,

19-21 Assess
YEAR 12
Even as you continue investing, make your child moneysavvy by linking his pocket money to his savings account balance.

YEAR 14

YEAR FOUR

Diversify the kids portfolio further by including individual stocks with a mix of large-, mid- and small-cap stocks that have performed consistently. As this portfolio and your other investments grow, keep updating your Will so that it earmarks the assets for the child to ensure a seamless transfer in case of your premature demise.

YEAR 11

YEAR TWO Theres still time

to catch up on the must-dos. Try maxing the PPF account and continue with the term plan and the kids Ulip. Deposit small amounts in the childs bank account.

Maintain the momentum in savings and investments. Educate your child on debit cards, chequebooks and initiate her into online educational resources on money.

Continue PPF investments. Update the Will regularly. Assess the childs needs for the next few years. Go for xed income and liquid options for reinvestment. Avoid long-term avenues with strict lock-ins such as Ulips.

YEAR 17

With target age within striking distance, you would now know whether the money saved for the young turk would sufce. If you are falling short, look at educational loans instead of tapping into your retirement funds.

higher study needs. You can seek one more extension of PPF. Derisk the portfolio further, if needed. Shift into debt funds (gives long-term capital gain advantage) and xed deposits. Bump up portfolio with windfalls.

YEAR 22 ONWARDS

YEARS FIVE & SIX Continue with the older

investments and invest parts of bonuses, dividends and increments. Buy gold ETFs, if you havent done so yet, up to 2-5 per cent of the portfolio. Augment large-cap stocks in the direct equity portfolio. Buy a separate health cover for your child or bump up your family oater cover.

YEARS SEVEN TO 10

YEARS 15-16 Systematically move 60 per

Continue bumping up the inputs in the existing investments by diverting parts of bonuses, dividends and increments to the kids portfolio along with cash gifts.

cent of the Ulip and MF portfolio into xed income options such as long- and short-term debt funds. Switch from high-risk equity to low-risk debt-based variants in the kids Ulip. Shrink the stock portfolio; rst sell aggressive stocks and then the defensive ones. Extend the PPF account.

Investments made in the childs name can be passed on to her. Use gold investments at the time of her marriage. For investments that are in your name but made for her, make a plan for their transfer. Keep updating the Will if you make further investments.

[18] O U T L O O K M O N E Y

2 5

F E B R U A R Y

2 0 0 9

Graphics: MANOJIT DATTA; Image courtesy: PHOTOSINDIA.COM

[ 19 ]