Financial Planning: Sumeet Vaid

My twins have just started college. I want to inculcate in them the habit of using plastic money wisely. Can you give some tips on how can I educate my children on use of credit and debit cards?
Your concern on use of plastic money by your children is understandable. Using credit cards is usually not recommended at an early age. Credit cards carry a very high rate of interest, ranging from 16 to 36 per cent. First of all, make them read the do’s and don’ts properly, which are available on the website of the issuing company, to protect them against frauds. An important aspect of using credit cards is that one has to make use of these judiciously to avoid debt traps. These must be used to make essential purchases that fall within one’s budget, and the bill should be paid before the due date to avoid penalty.

Use of debit cards is a better option, as they can be put to use only if you have the necessary amount in the bank account.

I am 28-year-old, single and working for three years now. My monthly saving is Rs 30,000. I need help with planning my finances. My investments are as follows: Life insurance = Rs 35,000 a year; Money-back plan = Rs 15,000; Ulip = Rs 20,000; Two equity-linked saving schemes (ELSSs) = Rs 20,000 & Rs 10,000 each; Stocks = Rs 70,000; and gold exchange traded fund (ETF) = Rs 30,000. I am looking for good returns over a longterm.
It’s good that you feel the need to organise your finances, and we suggest you have a goal-based approach for it. Under this, we first articulate your goals in terms of time and the goal amount, and also understand how much have you already saved or allocated for the same. We advise you to have a systematic investment plan (SIP), with an asset allocation strategy involving investments in equity, debt and gold ETFs. Some of the goals that you can plan at this stage are marriage, a comfortable retirement, a wealth creation goal and adequately insuring your life and health.

You have specified your insurance expenses, but not the sum assured from these insurance policies. Ideally, insurance premiums are expenses, and should not be seen as investments. Adequacy of insurance should be based on your human life value. We recommend you to buy a term cover after determining the amount of insurance you need.

ELSS is an equity-linked instrument that has a lock-in for three years, and is also tax efficient. ELSS is likely to provide returns over the long term. We suggest you to review the performance of your ELSS funds on a timely basis. To reap the benefits of investment over long term, you must make regular contributions in the form of SIPs through a goal-based approach.

The writer is the founder & CEO, Freedom Financial Planners. Send your queries to yourmoney@bsmail.in