FINANCIAL PLANNING FOR YOUR GRANDCHILDREN
· Grandparents can organize their investments for ensuring that their grandchildren benefit from them.
1. Earning grandparents
· You should consider growth assets, such as long-term equity-oriented investments, which need not generate any income during the relatively shorter investment period.
· You can consider index-linked products, where the risk is lower and involves lower monitoring.
· Balanced mutual funds, which have exposure to equity and debt, may also be suitable.
· These investments will provide appreciation at a level of risk that you are comfortable with.
· For your gold investments, a safer and easier option is to accumulate gold ETF units over time.
· You should also clearly identify the allocation for each grandchild and assign individual portfolios.
· This will enable moving the funds from riskier investments to safer options when it’s time for each grandchild to use the money.
· One way is to invest directly in each minor grandchild’s name with the parent as a guardian.
· Investment rules also allow grandparents to make investments on behalf of minor grandchildren.
· You can also invest in your own name and have the beneficiary grandchild as a nominee.
· Remember there will be tax implication on the investment income, either for the parent or for you.
2. Retired grandparents receiving pension
· If your pension is generating a surplus after meeting your requirements, you can then consider increasing the equity allocation in your portfolio, provided sufficient provision has been made for all your expenses and emergency needs.
· In this way, you can take into consideration the profile of your grandchildren who are expected to benefit from this in the future.
· This may be done over a period of time, to avoid altering the risk profile of your portfolio suddenly.
· One good way to do it would be to invest the monthly surplus into an equity product,
· Also, the maturity proceeds from fixed deposits, if any, can be allocated to this equity product.
· This will ensure that over a period of time, the portfolio will move from low growth to one that balances the requirements of both its current and future beneficiaries.
3. Retired grandparents having a lump sum
· If a lump sum wealth is gifted away to minor grandchildren, it will have tax implications since the income generated by the gift after transfer will be taxed in your hands.
· Moreover, once a gift is given, it cannot be revoked easily if the need arises suddenly.
· Gifting wealth to grandchildren after retirement may also impact your own financial security.
· So, a good option is to bequeath the wealth to your grandchildren through a Will, which will come into effect after your death.
· This also ensures that you have money during your lifetime, if you need it.
· Meanwhile, you should allocate the lump sum to specific equity-oriented products for meeting the needs of your nominated grandchildren for their higher education, after setting aside money for your own living expenses, emergency fund and retirement corpus.
· For this, you can even seek the help of a financial adviser or a family member who can help you with the investment plan and operational details.