Beware! Where is the market headed towards? No one can predict anything.

In such a scenario, What about my planning? Some people say, keep your insurance and investments separate. I do not agree with them. There are plans available today, like with Max New York Life, you have the “Life Invest” plan.

A wonderful plan that takes care of you from childhood to your age of 75 years. The first year deductions are nominal and very minimal in the following years. There are persistency units available from 9th year onwards and every 3 yrs from then on. This recovers all the first year as well as following year deductions. Actually, if you stay invested for a long tenure, your policy works deduction free.

A higher sum assured is recommended for younger age group, specially professionals, wherein the ideal payment term would be 10 years. From age 60 onwards, it can work like a retirement plan as well, till the age of 75. Thereafter, lump sum money is available to be utilized for the rest of your life.

When young, serves the purpose of insurance, giving high cover and later works as a retirement plan for old age. In between withdrawals are also possible even before age 60 is attained. So, take a look at this one before taking any decisions!!!!

Even with the falling markets of today, the NAV is around 21and about three years the fund is about to complete I.e. from NAV 10 to 21 today! Keep in mind the current market scenario!!!!

During a stint at a financial planning company, a gentleman asked to be guided on goal planning. I asked him to list down all his goals and to prioritize them. To my surprise he placed buying a Honda Accord above his child’s education. I asked him if he was sure of what he was doing. He replied that it would be a matter of around Rs. 5 lakh for the kid’s education – a sum that he could easily manage in the next ten-twelve years (his son was around 5 at the time). So I asked him if he had accounted for inflation. To which query he replied that the difference would hardly be enough to make it that big a deal. I showed him some simple spreadsheet calculations and he was quickly surprised to know that Rs. 5 lakh at present, adjusted for inflation at 5%, would amount to Rs. 11 lakh 16 years. At an average inflation rate of 8%, the amount would grow to Rs. 17 lakh.

He reprioritized. Quickly.

Children’s education is becoming more and more challenging as the years go by. Hence it should be the most integral part of financial planning. It should be at the top of any list of goals while preparing a financial plan. The earlier you start, the better it will be. Luckily for the above-mentioned gentleman, he realized it very early, rejigged his priorities and started planning accordingly.

There are two main pillars when we talk about children’s education.

The first is life insurance cover for the earning parent (or parents).

The question arises as to why this insurance is so important. In the event of any mishap and the parent (s) passing away, it would become very difficult for the child to get the otherwise promised good education. The life insurance payout can then help to keep the child’s educational aims intact. In this regard, a pure protection term insurance policy would meet the needs.

The parent (s) could, in addition, opt for personal accident cover. As the name implies, the risk of death by accident is covered here. Again, this is to ensure that the child’s education does not suffer if any of the parents pass on before their time in unfortunate circumstances.

The second pillar is investment. That is, investing present available funds in such a manner that will allow parents to provide the best education for their children.

You should start investing early to take advantage of the power of compounding. To state an example, let’s assume the cost of an MBA for your kid after 15 years is going to be around Rs. 10 lakh. At the 8% rate of return provided by the Provident Fund (PF), you will need to start putting aside an amount of Rs. 37,000 every year to meet this goal. Investing that same sum in equities would fetch much better returns. This could be done directly, via mutual funds, or using the portfolio management services (PMS) route.

To corroborate this, let’s take the performance of the Bombay Stock Exchange (BSE) Sensex, a benchmark index of the Indian equity market. In 1992, it stood at 1957 at trading close, 01 January 1992. At trading close, 31 December 2007, the BSE Sensex stood at 20286 – a 936% jump. This is way better than anything a PF would give you.

Here are some interesting numbers - where you had to put away Rs. 37,000 every year at 8% in the PF to get your child that MBA, you would only have to invest Rs. 27,000 in equities every year at a 12% rate of return. And if the rate of return is raised to 17% per annum, your annual invested amount reduces to just Rs. 17,000.

The biggest dream of any parent is to see his/her children doing well in their lives. To achieve that goal, one needs to plan accordingly. The earlier one plans the better the plan will work out.

Retirement planning is one of the most important components of financial planning. It is a process where financial planning is carried out to financially support for the period after retirement. An individual saves enough during his life when he is working, to invest in different assets to create a corpus when he retires. This corpus which is invested can generate income and fund an individual for his personal expenses after he retires.

As a matter of fact 80% of the individuals in India do not plan for their retirement. Very few individuals start retirement planning when they are young. People end up planning when they are nearing retirement. This makes it very difficult for them to maintain the same standard of living after retirement due to lack of planning from the beginning. Retirement planning must be done from the first day an individual starts earning until the last day. Thereafter it must be periodically reviewed.

The importance of retirement planning is increasing due to change in the financial situation of the country. Other reasons abound, like:

• Life expectancy: Due to advancement in science the average life expectancy of an individual has increased. People are living more than expected. They need additional funds to finance their expenses.
• Fixed Returns: It is difficult to get fixed returns on the money that is invested as the interest rate keeps fluctuating. Interest rates depend on the market situation. Hence planning is essential.
• Inflation: Inflation must be considered. It is very important that investments give returns more than the inflation.
• Decline in joint family system: Most families are now nuclear. So after retirement individuals have to take care for themselves.
• Increasing medical expenses: Old age brings on increased medical expenses.
• Lack of government support: Unlike other countries, the Indian government does not really support the retired individuals. Therefore each one has to plan for retirement.