Our fathers are usually our first teachers of financial wisdom. From taking us to the banks (at times to our utter displeasure) and teaching the basics of cash withdrawals and deposits to introducing us to the world of insurance and investments to reduce our income tax outgo, we owe most of our initial financial decisions to our dads. And that’s not all – they help us with the best insights even when it comes to the most important financial decisions of our lives, like buying a house.
However, it’s a fact that often our fathers are so busy fulfilling their financial commitments and taking care of everyone in the family that they don’t pay much heed in securing their financial future. They continue compromising on things that make them happy or they really need without complaining a bit. But hey, that doesn’t mean we cannot step in, especially now that we’re well-established because of their support.
And Father’s Day, which was recently celebrated, is a perfect occasion for us to take stock of their finances and help them make the most of their golden years with minimal stress. Here are some pointers that can help you do that:
Review their emergency fund
Our dads often take major financial decisions like settling house mortgage, paying for their kids’ marriages or higher studies towards the end of their professional lives that dents their savings– something that can leave them in a vulnerable position in the face of an unexpected event. As such, you should work with them to ensure they have in place an adequate emergency fund that should have at least 3 months’ worth of their expenses and minimize their dependence on a loan. Also, tell them that’s its best if they can set up the emergency fund in a separate senior citizen savings account(with an ATM/debit card at their disposal)to earn higher interest than a normal savings account.
Review their medical insurance coverage
The rising cost of medical treatment these days can easily drain their retirement corpus. So, ensure that their health insurance coverage is sufficient and comprehensive at all times (the coverage amount should be at least Rs. 5-7 lakh if they reside in a metro city). This becomes all the more important as even their office-linked group medical plan is unlikely to cover their post-retirement days, and even if it does, it might not have a sufficient coverage amount or crucial add-ons like critical illness cover, pre and post hospitalization cover, etc. Yes, starting a medical policy at a later stage in life will cost more in terms of annual premiums, so see if you can pay it on their behalf or include them in your plan if they are hesitant in doing so because of the cost factor.
Help them invest in low-risk instruments to achieve their financial goals
It’s not unusual for our fathers to stop investing after they retire, but that can lead to them compromising on certain things like international holidaysin order to safeguard their retirement corpus. So, discuss with them that if they set a short-term financial goal even for their “leisurely expenses” and invest accordingly in low-risk instruments, they can easily achieve the target in time. Top options include senior citizen fixed deposits (which offer higher returns than normal FDs apart from an additional tax benefit of up to Rs. 50,000 on the returns) and liquid mutual funds, which are in line with their low-risk profiles. Also, even you and your siblings can pitch in to fund for their “dream Europe vacation” by investing in recurring deposits or even starting a mutual fund SIP.
Start sharing some of their financial commitments
Well, taking care of a hundred big and small financial commitments every month all their lives is sure to have left them exhausted. So, the best gift that you can give to him is starting to share some of his financial commitments. More than the money factor, it’s the freedom from having to bother about so many things that he would really appreciate. Especially because that would allow him with more time to do things he really likes doing. And thanks to the convenience of internet, a number of things can be done even if you don’t stay with him.
The author is CEO, Bankbazaar.com