Setting aside a portion of income for savings and creating a separate bank account for emergency funds can provide a safety net during unexpected situations, says Raghavendra Rao, Chief Distribution Officer, Future Generali India Insurance Company.
In an interview with MintGenie, Rao said while guiding his children towards financial independence, a responsible father also acts as a safety net, providing support when needed.
Edited Excerpts:
Q. How do you correlate a father’s responsibility with his wards’ financial independence?
A father's responsibility for his children's financial independence is multifaceted. He can help by providing a strong foundation, emphasizing education, teaching financial literacy, encouraging independence and responsibility, and offering support when needed.
By providing a strong foundation, fathers can instil values of education, hard work, and financial discipline in their children. Fathers can help their kids develop the knowledge and skills they need to succeed in the workforce by emphasizing education. By teaching financial literacy, children would be able to make sound financial decisions and manage their money wisely.
Encouraging independence and responsibility is key to fostering financial autonomy. While guiding his children towards financial independence, a responsible father also acts as a safety net, providing support when needed. Fathers can help their children develop the skills they need to be financially self-sufficient, overcome financial challenges, and play a vital role in helping their children achieve financial independence and a secure financial future.
Q. Fatherhood entails financial responsibility. How do you think a father should plan finances to secure his children’s finances in the long run?
Financial responsibility is an integral part of fatherhood, and securing children's finances, in the long run, requires thoughtful planning. A responsible father can adopt several strategies to achieve this goal.
Firstly, obtaining suitable insurance policies is crucial. Life insurance policies, such as term plans with high coverage, can provide financial security for children in the event of unforeseen circumstances.
Additionally, policies that offer a maturity benefit or savings component can help accumulate wealth over time.
Education planning is another key aspect. Given the rising cost of education in India, starting early to save for children's education is essential. Exploring specific education-oriented investment options like the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) for daughters, or the National Savings Certificate (NSC) can be beneficial.
Diversifying investments is advisable for managing risk and maximizing returns. Considering options like mutual funds, fixed deposits, real estate, and stocks can help achieve financial goals. It is advisable to consult a financial advisor with knowledge of the Indian market to receive tailored guidance.
Building a savings habit and maintaining an emergency fund is vital. Setting aside a portion of income for savings and creating a separate bank account for emergency funds can provide a safety net during unexpected situations. Exploring government schemes is also beneficial. Schemes like the National Pension Scheme (NPS), Employees' Provident Fund (EPF), and Pradhan Mantri Vaya Vandana Yojana (PMVVY) offer retirement benefits and guaranteed pensions for senior citizens.
Tax planning plays a role in optimizing finances. Familiarize yourself with tax benefits available for parents in India, such as deductions under Section 80C of the Income Tax Act, which can be utilized for life insurance premiums, tuition fees, and certain savings schemes.
Estate planning is crucial to ensure a smooth transfer of assets and protect children's financial interests. Preparing a will and considering the establishment of trusts can provide long-term financial security.
Q. You are a father to your son as much as you are a son to your father. How do you think the definition of money has changed over the period?
As a father, I see money as a tool that can be used to provide for my family and to help them achieve their goals. I want to teach my son the value of hard work and responsibility, and I want to help him understand the importance of saving and investing. I also want to teach him about the different types of money and how they work.
I believe that money can be a powerful force for good, and I want to help my son use it wisely. I want him to understand that money can be used to help others, to make a difference in the world, and to create a better future for himself and his family.
The definition of money has changed over time in many ways. In the past, money was primarily used as a medium of exchange, a way to buy and sell goods and services. Today, money is also used as a store of value, a way to save for the future, and as a unit of account, a way to measure the value of goods and services.
One of the biggest changes in the definition of money has been the rise of digital currency. Digital currency is a type of money that is not physical but exists only as data on a computer. Digital currency has many advantages over traditional currency, such as being more convenient and secure. Another change in the definition of money has been the decline of cash.
Cash is physical currency, such as coins and bills. Cash is being used less and less, as people increasingly use credit cards, debit cards, and other electronic payment methods. The definition of money is still evolving, and it is likely to continue to change in the future. As new technologies emerge, and as our needs and preferences change, the way we use money will also change.
Q. Many people negate the importance of health insurance. From being the father of a toddler to being the father of a college-going ward, what changes do you advise in the structure and coverage of the health insurance plan bought?
As your child progresses from being a toddler to a college-going individual, it becomes essential to adapt your health insurance coverage to cater to their evolving needs. There are several key considerations to keep in mind during this transition.
Firstly, evaluate the coverage limit of your health insurance plan and consider increasing it as your child's healthcare requirements grow. If your child is no longer covered under your family health insurance plan, explore options to include them in your policy or purchase a separate plan for them.
Assess the network of hospitals and clinics associated with your insurance plan to ensure that reputable healthcare providers are available near your child's college or university. Also, consider adding critical illness coverage to your plan to prepare for potential health risks.
Review the waiting period clause of your policy and ensure that it aligns with your child's current and future healthcare needs. If needed, switch to a plan with shorter waiting periods.
It is important to regularly review and update your policy as health insurance needs may change over time. You should also consult with insurance providers or financial advisors who can guide you through the process and help you choose the most suitable health insurance plan for your family.
Finally, to make an informed decision, compare different health insurance policies, assess their benefits, and select the one that best suits your family's needs.
