MANAGEMENT OF FUNDS FOR PARENTS, KIDS AND RETIREMENT
This is a very important subject for everyone. An article in the OutlookMoney fortnightly magazine of Jan 31, 08 discusses various aspects of this topic. Most of us are faced with such situations. In real life, the parents, kids and the couple may be required to live at different places, due to their different requirements and thus the expenses will be high. The financial needs of every one are continuously rising, but still we have to manage the things. There are medical costs, education costs, loan EMIs and new challenges. The percentage of joint families is declining, and that of nuclear families is increasing. The people are now moving out for work, may shift from one job to another, and hence from one place to another. The longevity of persons all over the world including in India, is increasing and so the requirements of funds for retirement, are also increasing. India does not yet have old age pension and public health care system for everybody. Hence children have to provide full support. The requirements are not same in all families. Somewhere it is money, in others it is providing the physical care (even if living in different cities). Minor problems may even be ignored by the parents. They may get support if any, from the people of their own age. Some parents in old age may not like to take money from their children, but they will need physical help. If parents and children live in different cities, it only adds to the worries. The couples have to prepare their children for education, and also they have to see their own career. Thus they may not feel joyous. Many times the situation is so complicated, that a solution is very difficult to emerge. The article covers various aspects of the financial problems faced by such people. For managing the finances of parents, it is suggested that highest possible medical cover should be ensured. Further a financial support system should be worked out, in consultation with parents, siblings and family friends. We must always have adequate funds, in liquid funds, bank accounts and cash at home for various emergencies. We must also try to obtain higher income with growth investments, life insurance annuities, MIPs, reinvestment of savings in equity or even reverse mortgage.
For taking care of the future of the children, we should arrange proper life coverage, providing largest cover at lowest cost. PPF account should be opened for each child with regular contribution. For the children there should also be some investment in well performing equity. Above all, the couple should manage their own funds properly, keeping adequate funds for emergencies, including that required for parents. Retirement savings must be kept continuously, and PF and PPF funds should not be used. It is advisable to increase contribution to PF. Not only this, we should consider investment in equities, especially for top performing equities or in real estate. It may be advisable to postpone the retirement time, and also be practical in all those matters where funds are required, considering the priorities. The couple may face pressure, worry and anxiety for providing funds for the three generations, but with right attitude, approach and planning, we can manage it in a stress free or reduced stress manner.