"Why you must have a child insurance plan"

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The rising cost of education is troubling Indian parents. More than 60% of the respondents in an online survey by ET Wealth listed this as their biggest worry. This was followed by lack of knowledge, not saving enough and starting too late.
We hadn't included the biggest worry-the risk of their own untimely death-as a choice. We should have. According to the National Crime Records Bureau statistics, an Indian dies in an accident every 90 seconds. 

It's a terrifying thought for any parent-leaving his family without adequate means to lead a comfortable life. The only way to get over this worry is to take a sizeable life insurance cover. Financial planners swear by term plans, arguing that these policies are the best way to cover the risk of early death. They certainly are because they offer a high cover at a low cost and give out a lump-sum amount to the nominee if the policyholder dies. But the policy ends right there. 

On the other hand, a child insurance plan offers a lump-sum payment on the death of the policyholder, but the policy does not end. All future premiums are waived and the insurance company continues investing this money on behalf of the policyholder.
The child gets the money at specified intervals as planned under the policy. In this way, the parent ensures that his child's needs are taken care of even if he is not around.
Almost all life insurance firms have child plans in their portfolio of offerings. Some of these are market-linked policies, which allow policyholders to invest in equities and debt, while others are traditional plans, which invest only in debt. In case of a life insurance policy, the premium paid for a child plan is eligible for tax deduction under Section 80C, while any income from the plan is tax-free under Section 10 (10D).
Critics of child plans argue that these policies come at a very high cost compared to a simple term plan. They say that instead of allocating a huge sum as premium to a child plan, a parent can buy a term plan of the same amount for himself and invest the balance money in mutual funds. On maturity, he will have a bigger corpus 

(see table) 

However, they miss out on a crucial detail: 

What if the parent dies five years after taking the plan? The term plan will give a lump-sum for the immediate needs of the family and further investments in the mutual fund will stop. The child plan, however, will not only pay the lump sum, but continue investing on behalf of the policyholder. Insurers believe the waiver of premium feature in a child plan is the key as it doesn't let the death of the policyholder derail the investment plan for his child.
More importantly, the average, small Indian investor is yet to mature into a long-term player. He is easily unnerved by market volatility and lacks the necessary discipline to create wealth over the long term. It's quite likely for a parent to stop putting money in a mutual fund for his child. "If he is given a choice, the investor loses discipline and stops investing," says Swapnil Pawar, head of products and advisory, Karvy Private Wealth. 

On the other hand, a child plan will make the parent continue investing year after year, thus ensuring that he saves enough for the kid. One can stop paying the premium after five years, but experts say this should be a tactical ploy to avoid a cash crunch, not a strategic move to reduce one's investment.
Insurers say child plans are structured to meet the needs of the child. A normal Ulip stops if the insured person dies. This is an unsatisfactory result as the funds will be paid too early and may be used to meet other needs, not the ones planned for.

Higher benefit, higher cost :

While the waiver of premium is certainly a big advantage, this double benefit doesn't come free. The mortality charges for a child plan are higher than those levied by an ordinary Ulip (see table). The steeper charge is also because child plans are type II Ulips, which give both the insured amount and the fund value to the nominee on the death of a policyholder.
Type I Ulips give only the higher of the two sums and, therefore, have a lower mortality charge. In the table, the ordinary Ulip is a Type I policy. 

Though the waiver of premium benefit is built into the child plan, you can opt for this benefit as an add-on rider in an ordinary Ulip as well. For a 32-year-old taking a 15-year plan with an annual premium of Rs 1.2 lakh, this benefit will cost around Rs 16,000 a year. 

By Babar Zaidi, ET Bureau | 24 Feb, 2014, 02.40PM IST 

How to Ruin Your Retirement in 3 Steps

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Most of us say that we want a successful retirement. Unfortunately, too many of us don't think things through, and could end up unprepared for retirement. It's remarkably easy to wreck your retirement years. Here are three steps that are likely to ruin your retirement:

1. Forgo a plan. Planning often seems overrated. After all, a plan can be restricting. Unfortunately, without a plan, there is nothing to help you on your path to retirement. Without a plan, it's too easy to forget about the end game and just focus on what's happening today. If you want a successful retirement you need to look ahead.

A retirement plan forces you to look beyond what you think you want right now. Instead, you need to look at where you want to be, relative to where you are right now. Your retirement plan lays out the steps you need to take to get from here to there and possibly even retire early. Without proper planning, you are likely to find yourself without enough to retire, and in danger of living longer than your money.

Create a realistic retirement plan that allows you to save up for the retirement you want, and that encourages you to start taking the steps that lead to a successful retirement later. If you don't have a road map to a better retirement, you may not ever get there.

2. Rack up debt. One of the biggest retirement killers is debt. When you have debt obligations, your money isn't your own. Instead of using your money to build wealth, you are paying interest straight into someone else's pocket. During retirement, you want fewer drains on your money. Your retirement income is more fixed. If a large portion of that income is going toward paying interest debt, you could end up without enough to pay your retirement costs.

Instead of getting into debt now, live within your means. Make a plan to pay off debt before you retire, including mortgage debt if possible. The fewer obligations you have in retirement, the better off you'll be. Plus, living within your means now is good practice for creating habits that will enable you to avoid outliving your money during retirement.

Learn to live without debt, and your retirement will be more successful in the long run. And you'll be happier knowing that more of your money is being used to help you maintain the retirement lifestyle that you actually want.

3. Neglect your health. The cost of health care continues to rise, and poor health can really ruin your retirement. Not only is poor health expensive, but it also seriously reduces your ability to enjoy yourself in retirement.

Take care of yourself now. While there is no complete guarantee that you won't get sick, or end up with a chronic illness, you can still improve your chances of living with excellent health in retirement. Exercise, eat healthier including brain boosting superfoods, and get the right amount of sleep. Remember to include time for relaxation in your routine.

If you stay active, body and mind, you can improve the odds that you will need fewer medical services. Good health can help you reduce your overall costs in retirement, as well as enjoy yourself better. It's hard to enjoy the money you have saved for retirement if your body is in such bad shape that you can't do anything.

Consider your current situation, and think about what you want for the future. Create a plan to pay off debt and save your money. And, while you're at it, don't forget to take care of yourself. Keep your body healthy and your mind sharp, so you'll be better able to enjoy retirement for many years.

By : U.S. News

Nov 13th 2012 6:00AM

Updated Nov 26th 2012 1:24PM

Jeff Rose is a certified financial planner and U.S. combat veteran.

RBI Issues Guidelines For Small & Payments Banks

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The Reserve Bank of India on Thursday issued final guidelines for companies seeking to set 

up payments banks and small finance banks in a bid to expand banking services to more 

people and small businesses. Elaborating the eligibility criteria, the central bank 

has  included non-bank prepaid card issuer, mobile companies, telecom companies, 

business correspondents, PSU companies, real sector cooperatives and supermarket chains 

as promoters of payments banks, while  it has allowed NBFCs, MFIs and local area banks to 

convert to small banks. 

The RBI says that promoters can have JVs with banks for payments  bank but they must 

have experience of running the business for 5 years. 

These banks can take demand deposits of maximum Rs 1 lakh per customer and can issue 

ATM/debit cards but not credit cards. 

Also, they can offer payments, remittance services and can distribute financial products like 

mutual funds and insurance. 

However, the RBI has made it clear that  payments banks cannot undertake lending 

activities. Payments banks can accept deposits and remittances but cannot provide loans. 

Small finance banks are aimed at lending to  “unserved and underserved sections including 

small business units”, the Reserve Bank of  India (RBI) said. Reacting to the news, Ashvin 

Parekh of APAS says the guidelines are a little more liberal compared to what he was 

expecting at one point in time. 

This may be of some interest to all three constituents i.e. to telecom companies, 

supermarket chains and also to NBFCs, he adds. But Parekh says, the only question now is 

how to establish financial viability of such entities if they are going to work purely out of the 

interest income received on SLR.  Sanjay Kapoor, former CEO, Bharti Airtel  feels the 

proposition about joint ventures with banks has made the proposition more interesting. 

“One of the basic criteria's  is anybody who has a very large distribution network is an 

eligible bachelor from a viability perspective for payments bank,” he told CNBC-TV18. As 

per the new guidelines, the banks must maintain cash reserve ratio (CRR) and should keep 

75 percent of their deposits in SLR up to 1 year maturity. 

Moreover, these banks need to keep maximum 25 percent as deposits  with other banks for 

operational use, says the new guideline. 

Under the new norms for payments banks, the minimum paid-up equity capital is Rs 100 

crore and the leverage ratio should not be less than 3 percent. Liabilities must not exceed 

net worth by 33.3x and the promoters must hold 40 percent of equity for the first 5 years. 

Moreover, the guidelines say that foreign holding should be as per FDI policy for private 

banks and they must have a high-powered customer grievances cell. The RBI does not allow 

large state-run entities and business houses to set up small finance banks and bars JVs by 

different promoter groups to set up such entities. Companies will have to apply by January 

16, 2015, for licences in both categories, and the central bank said it would consider more 

applications at a later stage.

When Do You Need an Investment Objective !

When Do You Need an Investment Objective !

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Specifying exact goals that your investments must achieve is a crucial step in eventually meeting those goals

The investors were a retired couple who, despite having a good understanding of investing, were unable to figure out whether they were on the right track. They had investments in a number of funds, mostly equity. Out of these investments, they had a number of needs. One, they needed a monthly amount regularly to meet household expenses. Two, they needed emergency funds that could be withdrawn at short notice for unforeseen uses. Three, they had some large family-related expenses coming up in about three years. And four, there was the money they would need in the long run to fund their living expenses, which means to fund their monthly expenses far into the future as prices rose and needs changed.

Even though this couple had chosen their funds well, they were having problems understanding whether they were on the right track. What they needed was nothing out of the ordinary. In fact, many others have more complex needs. Even so, it was difficult for them to be confident that their investment portfolio was indeed the right one for the job.

But that wasn’t their fault. Understanding how an investment portfolio maps onto a set of different needs is practically impossible. Some of the needs are contradictory. For example, the short-term income needs need stability while for the long-term nest egg, high returns are more important. Looking at a list of ten or more funds; with SIPs, dividends and withdrawals of varying amount flowing in and out; with different performance and quality levels; and different expectations of risk and returns, it’s impossible to figure out, even roughly whether the portfolio will do the job. All you can do is to look at the overall value of the portfolio and get worried and panicky when it declines.

In fact, it’s entirely possible that your investments are on the right track if one evaluates them piecemeal according to separate goals but the overall picture is unclear.

So what’s the solution? Some sophisticated analytical tool that will give us an insight? No, actually, it’s something that someone in your family probably already practices, or at least used to in the decades gone by. The solution is bags— separate bags for each need.

Do you have an old lady in your family who used to save money by keeping it in little bags, each for a different purpose? Lots of us do, or at least did in earlier days. Many of us know of women in the older generation who would run her family’s entire life’s finances on this basis. They typically have little pouches with a drawstring around its neck, like a pyjama. When a husband brings home his monthly salary, they put some money in the vegetables pouch, some in the milk pouch, some in the household servant’s pouch and the dhobi pouch and so on.

There were also a few bigger pouches that were meant for savings, as for a daughter’s wedding. This pouch would be converted into some gold trinket or the other every few months.

While financially sophisticated readers will call this system primitive and sub-optimal, it has a lot going for it. It was a simple system, easy to implement and easy to understand and above all, it worked. Most importantly, it incorporated one of the golden rules of personal investment management— separate portfolios for separate goals.

The old lady would not have been such an organised household manager if she had kept all the money into one big bag, and nor should you.

Ref : http://www.valueresearchonline.com/story

"Kisan Vikas Patra" - Should You Invest !!

The Kisan Vikas Patra is a perfect small savings scheme, and Mr. Jaitey should ignore all criticism about it being a conduit for black money

The Kisan Vikas Patra, which post offices are now offering for sale after a hiatus of a few years, is a simple and accessible savings instrument that provides reasonable returns and absolute safety. But that's not what you'll hear from the investments and business commentariat.

The general opinion of investment advisors seems to be that the KVP is a useless savings medium because it has no tax break and thus offers poor post-tax returns. It is also said to encourage black money. In order to illustrate how poor the KVP's post tax returns are, practically every one of these analyses calculates the same for people in the highest tax bracket. One also reads how it bank fixed deposits or fixed maturity mutual funds are better alternatives. It's as if no one in this country is in the lower two tax brackets or below the tax threshold. Or that KVP is meant as a savings instrument purely for the upper middle-class and above.

I think we need to step back and consider just how difficult it is for the target audience of the KVP to access safe and convenient savings mechanisms. You go to a post office and buy a certificate worth somewhere between Rs 1,000 and 50,000 and 100 months later the post office gives you double the amount. The KVP is easy to understand and easy to access. Given that it's being sold by the post office, it's safety is also easy to understand. Each of these points is crucial.

ust the fact that it's returns are expressed in terms of double your money in 100 months' is a great thing. It's puzzling to watch analysts who try to explain' KVP by calculating the per annum returns (8.67 per cent) of the KVP so that it can be compared to fixed deposits. A far better way of actually make this comparison would be to calculate how many months it would take for money to double in the FD (99 months). If you don't appreciate that months-to-double is a better way of explaining returns to a depositor an annualised percentage, then you probably haven't understood how people actually think about money.

The other bugbear of KVP is supposed to be that it's a way of parking and transferring black money. This is probably true, but it's also irrelevant. Recently, it appears to have become fashionable to talk about black money in absolutes. Since some of the usage of KVP will undoubtedly be in black money, some commentators claim that it is unacceptable. This is, at best, a hypocritical point of view. There is no part of the formal financial system that cannot be used to handle unaccounted income with sufficient effort. To completely eliminate black money, you will pretty much have to abolish money or abolish taxation.

The question is not whether KVP will facilitate the handling of black money, but what is the balance between the legitimate and illegitimate uses of KVP. Here, I'm afraid that those who think that the KVP is nothing more than a 50,000 rupee currency note have been spending too much time in the company of those who use it as such, and not enough with those who use it as a way of investing five or ten thousand rupees safely. When I read news about crime, I find that practically every criminal uses cars and cellphones. Is that a good reason to ban motor vehicles and mobile telephony?

In fact, Mr Jaitley should resists the urge to have tight KYC (know your customer) norms for KVP. If you give the post office clerk an excuse to reject the small depositor's ration card as proof of identity, he'll do it just to reduce his workload. Given how things actually work in our country, those who want 2000 KVP certificates as a way to store Rs 10 crore will manage to get their way, but the Rs 10,000 depositor who needs financial inclusion will be driven away by this KYC nonsense. We've seen this happen in every other part of their financial system, but hopefully, schemes like KVP and JDY shouldn't suffer from the same problem.

Ref : http://www.valueresearchonline.com/story

" Banker's Blog "

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Hi everyone, this blog has been created for all the Bank professionals....

The discussion in the blog shall be restricted only to the banking professionals !!

I am itself a banker for last 9 years almost and have started my career as an Assistant Manager at the then largest Private bank of India...

I handled NRI Private banking division there, then shifted to one of the largest foreign bank as Manager and handled the Retail Banking division.

At last I move to the largest Private bank of India and currently working as the Branch Manager in the Assistant Vice President position..

I have seen many ups and downs in my last 9 years of career as a banker, I have reported to N no. of the managers and handled some of the best and large teams as well....be it in South India or North !!

I have many doubts in mind and the one crop up more enough is "Are the bosses always like this ? "

I always thought (when i was not handling the teams) that I would not handle my team like this at all !!

I always believe that people sometime takes it more on their ego and to their personal satisfaction and sometime becomes so in-human....

But when I started to led the team, i face difficulty but I never treat my team members like the way we have been treated in the private banks !!

So, hereby I want to start a discussion from all over the world from the private banker's to share their views on the work culture, bosses, or if you are boss - then how would you treat your people....Is your bank is actually the way people sees it or the story is something else !!

Or share anything you would like to share !!

Regards....