Financial Cocktail Samosas: Bitesized Money Morsels For You, 20/07/2023

Health Cover and Maternity Cost

According to a health survey by the National Statistical Office in 2017-18, 9 out of 10 women delivered a child in a hospital. Moreover, C-Section deliveries have risen in the past decade. 26% of the deliveries in Government hospitals and 56% in urban private hospitals are by C-Section. The survey also stated that C-Section deliveries cost about five times more than normal deliveries. And these numbers are old. Imagine the increased medical expenses now! Given these rising costs, a maternity health plan is a must.

(Source: Hindustan Times) 

The pregnancy of the mother brings the initial happiness of parenthood to the whole family. However, for those who do not have the benefit of Govt-provided health coverage like family members of armed forces personnel not employed in the armed forces, the maternity cost often has the tendency to bring that happiness down, if the parenthood phase is not planned well in advance.

It’s always advisable to have health insurance cover of at least 5– 10 lakhs. Most health insurance plans have inbuilt maternity cover but this needs to be cross-checked else a separate maternity cover or add-on needs to be purchased.

Some salient features of a maternity cover are:

1️⃣ Waiting period: All policies have a waiting period that starts from a minimum of 9 months and can go up to 48 months.
2️⃣ Benefits: It covers the cost of childbirth and pre and post-natal care. Thereafter, depending on the plan selected, you might also get coverage for Complications of pregnancy, Infertility treatments, Newborn coverage and First-year vaccination of the newborn.
3️⃣ Eligibility: 18 years of age

4️⃣ Number of pregnancies covered: Cover is usually allowed for up to a maximum of two deliveries. However, it could vary as per the insurance service provider.

Buy health insurance with a good network of hospitals and a high claim settlement ratio, so that you can go through all health-related phases of your life in a cashless and stress-free manner.

(Contributed by Jatin Uppal, Deputy Manager, Hum Fauji Initiatives)

Aspirations or Affordability? Should You Take a Loan for Your Child’s Education?

Providing the best education for their children is a top priority for most parents. However, deciding how to finance your child’s education is a significant concern for many parents. With rising tuition costs and the desire to provide the best opportunities for their children, parents often face a dilemma: should they take a loan to fulfill their child’s education or consider the affordability of such a decision?

While aspirations are important, affordability cannot be ignored. Before making a decision, parents should consider their financial situation and the long-term implications of borrowing. While a loan can provide immediate access to funds allowing the child to pursue the desired educational path, it also means accumulating debt that could potentially impact the family’s financial stability.

It is also advisable to evaluate alternatives like Scholarships, grants, and part-time work opportunities before resorting to a loan. These options can also help promote financial independence for your child.

If taking a loan is unavoidable, make sure to consider various factors like interest rates, repayment terms, and their impact on your overall financial health. Research and compare different loan options to find the most favorable terms.

Additionally, encourage your child to actively participate in the decision-making process. Help him/her understand the financial implications of borrowing and teach them valuable lessons about financial responsibility.

In conclusion, while aspirations for your child’s education are essential, it is crucial to balance them with affordability. Evaluate alternative funding sources, weigh the pros and cons of borrowing, and involve your child in the decision-making process. By making informed choices, you can support your child’s educational goals while ensuring a secure financial future for your family.

(Contributed by Manish Kumar, Relationship Manager, Team Vikrant, Hum Fauji Initiatives)

The Battle of Precious Metals

In India, Gold and silver are not only used for gifting but also are used as an investment as they are perceived to be a hedge against inflation and market uncertainties and many Indians believe they will always retain their value and demand. But is it a good idea to buy gold or silver in the current market?

If you are looking for long-term returns and diversification, gold may be a better option than silver. Gold has a lower volatility than silver and tends to perform well during economic crises. Gold also has a higher demand from central banks, jewelers and investors. However, gold is also more expensive than silver and may require more capital to invest.

If you are looking for short-term gains, silver may sometimes be a better option as it has a higher volatility giving better arbitrage opportunities and tends to perform better during economic recoveries since it has a higher industrial demand than gold from sectors such as electronics, solar panels, medical devices and batteries, apart from having an ornamental value.

There are various modes of investing in gold or silver in India. Some of the popular ones are:

🟢 Physical Form: This involves buying gold or silver jewellery, coins, bars etc. This mode offers you direct ownership of the metal. However, it also involves high costs such as making charges, GST, cost of purity marking and storage costs.

🟢 Sovereign Gold Bond (SGB): Under this scheme, you can buy bonds issued by the RBI that are linked to the price of gold. The bonds have a tenure of eight years with an exit option after five years. The bonds offer you two benefits: price appreciation plus a fixed annual interest rate of 2.5% payable semi-annually. The bonds are also exempt from capital gains tax if held till maturity.

🟢 Digital Gold: This mode of investing uses platforms such as DigiGold. You can buy or sell gold or silver at live market rates with a minimum amount of Rs 1. The metal is stored in secure vaults by the platform and you can redeem it for physical delivery or money anytime. The platform charges you a nominal fee for storage and delivery.

Choose the mode of investment that suits your budget, convenience, and comfort level.

(Contributed by Aman Goyal, Financial Planner, Team Prithvi, Hum Fauji Initiatives)

What have our clients asked us in the last 7 days?

Question: What is better for me – going in for Direct Mutual Fund (MF) Plans or Regular MF Plans? If Direct MFs, then can I go ahead on my own and not use the services of an advisor like you?

‘Regular MF Plans Vs Direct MF Plans’ is a debate that keeps going on all the time in almost every country. But before anything else, any investor must know what value does a Financial Advisor bring to a client apart from just telling him/her where to invest?

Most people look at a financial advisor as someone who guides them to invest well and get them the ‘highest possible’ returns. If you too think so or your financial advisor also conveys the same vibes, it is high time you had a hard look at your relationship with your advisor.

Here is what a ‘good advisor’ can and should do for you –

  • Assist you in formulating and quantifying your financial goals, which should always be the primary reason why should invest money rather than spend it in a ‘great today’ (and not care for tomorrow)!
  • Assist you in selecting the appropriate asset allocation and investment avenues so that you can meet your future financial requirements (‘financial goals’) in a consistent way while taking only as much of risks as is comfortable to you.
  • Assistance in distinguishing between good, bad and ugly investment avenues.
  • Undertake the hard work of periodic Portfolio Reviews and rebalancing if required.
  • Help you tide through volatile markets – handhold you and prevent you from taking decisions based only on your emotional biases.
  • Help you devise a withdrawal strategy when money is required to meet your financial goals.
  • Help to manage regular income after retirement if so required.

When it comes to investing, investors get too fixated on the costs, many-a-times making it the sole criterion of taking a decision on how to invest. Most people do not mind paying experts like Doctors, CAs, Lawyers, etc to take their service but financial planning is something people think they can entirely do on their own using tips, internet-based advice and patchy advice from friends and relatives. This view may have been correct when bank deposits and NSCs were the only options. But with today’s complicated financial markets and variety of instruments, that may not be the case. And an investor could benefit a lot by talking to their financial advisors about their future life planning needs.

Please remember – ‘It doesn’t matter how fast you’re moving if you’re headed in the wrong direction!’

If you are an experienced investor, confident that it is your own game, you may choose to go direct without a financial advisor. But for the majority rest, it is about paying an ‘all-inclusive’ fee (for advisory and investment) with regular plans or paying a fair-priced fee separately to a Registered Investment Advisor (RIA) for the direct plans. There is nothing in-between in any viable advisory service.

We, at Hum Fauji Initiatives, do ‘Regular’ plans as also ‘Direct’ plans. To us it does not matter what you choose because, in regular plans, we get our dues from the mutual fund companies and in direct plans, the investor pays us. Our Direct Plan fees are so structured that we get adequately paid for the work that we do.

(Contributed by Team Vikrant, Hum Fauji Initiatives)

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