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7 Financial Gifts For Your Sister This Raksha Bandhan


Time to read: 3 mins | July 25, 2017

In a less than a month from now, the festivity and fervour will begin. It sets off with Raksha Bandhan or Rakhi.

The history and eminence of Raksha Bandhan dates back to thousands of years and is garnished with many mythological stories. Raksha Bandhan in Sanskrit symbolises the tie or knot of protection a brother promises his sister. Hence, on the auspicious day, sisters ceremonially tie a Rakhi on their brothers’ wrists and wish for their wellbeing. In turn the brothers pledge to protect and take care of sisters under all circumstances. Further, it is one of those several festive occasions where family bonds are upheld. Therefore, today Raksha Bandhan is even celebrated between cousins, distant family members, and also non-biological brother and sisters, irrespective of caste, creed, and religion.

Weeks ahead of the festivities, colourful rakhis may have caught your sight, deliberating about the return gift you can give your sisters this year. The usual things one thinks of are purses, watches, jewellery, apparels, cosmetic kits, box of mithai, chocolates, or dry fruits. But if you wish to protect her in a financial sense, here are things you should consider:

  • Buy a risk cover
    Considering today's lifestyle comprising of long working hours, stress, lack of physical exercises, skipping meals, junk food, etc., the threat of facing an ailment is always present. So, if you really want to ensure the safety and security of your dear sister, pay  health insurance policies premiums on her behalf.

    Likewise, you can even be the proposer for her life insurance policy. But when you consider one, select term insurance and over others to indemnify risk to life in the purest sense. However, please note that you won’t be eligible for a tax benefit under Section 80C for standing as a proposer to your sister’s life insurance policy.
  • Start an SIP – help her plan for her financial goals
    We all have financial goals—be it buying a house, an expensive gadget or vehicle, travelling for leisure, obtaining good higher education among many other things. But to achieve these in a systematic way, investing sensibly, so money can work for you is imperative.

    Conventionally, one thinks of investing in Recurring Deposits (RD); but if you consider the rate of interest, and the fact that interest is taxable amid a time where inflation is eating into your hard-earned savings, it can’t be the only option for your investments.

    SIP or Systematic Investment Plan in a mutual fund scheme(s), on the other hand, seems more promising. Remember selecting the best mutual funds is critical. For a higher risk appetite and longer time horizon before a financial goal befalls, equity mutual funds can prove worthy as they have an effective portfolio multiplier. Just as you have financial goals, so does your sister. And if you, as a dutiful brother, can help her fulfil some of them, she would be touched.

    Mutual funds provide diversification, are professionally managed, investments can be small amounts, ensures liquidity, and are well regulated by the Securities and Exchange Board of India (SEBI). But selection is crucial, and if you aren’t well-versed, reach out to a financial planner or an investment adviser who can handhold you in this regard. Don’t make any decision in haste as it may prove detrimental. Until you aren’t sure where to invest, park your money in a savings bank account and/or a liquid fund. And, if the time horizon before goals befall is short, consider investing in ultra-short term and short-term debt funds.
  • Consider investing in paper gold
    Gold as an asset class illustrates a trait of being a safe haven, a saviour in times of economic crisis. It can add to the financial security of your sister over the long-term and is, indeed, a deserving gift for Rakhsha Bandhan. But as far as possible, hold back from gifting physical gold as it carries a high holding cost. Instead, consider investing in gold ETFs and/or gold saving funds on her behalf.

    Gold ETF is an instrument that represents an ownership of gold assets. Gold is held on your behalf by an appointed custodian for the ETF. When you buy a Gold ETF, you get a contract indicating your ownership in gold equivalent to the rupee amount of your investment. They are open-ended funds which track prices of gold, and each unit of gold in the fund that you can buy, is equal to 1 gram of gold.

    Gold ETFs are listed and traded on a stock exchange and can be bought and sold like stocks on a real-time basis; therefore to purchase a demat account is necessary. The advantage of gold ETFs are as follows:
    • Convenient means of investing in gold at the prevailing market price (no premiums involved like in case of physical gold)
    • One does not have to worry about storage and security aspects
    • One does not have to worry about the quality (because as per SEBI regulations, the purity of underlying gold in GETFs should be 0.995 fineness and above)
    • Low holding cost (as there is no need to pay hefty locker rents; the only cost involved is an annual demat account maintenance charge + brokerage when you transact)
    • High liquidity (as it can be easily sold in the secondary market on a real-time basis, while in case of selling physical gold, making charges)
    Gold saving funds (also known as gold funds) are generally ‘fund of fund’ schemes that invest their corpus into an underlying Gold ETF, which benchmarks their performance against the physical prices of gold. Hence by doing so, they attempt to provide returns that closely correspond to the returns of its underlying Gold ETFs. Even though gold funds are passively managed, the most wonderful thing about them is that, they provide you with the opportunity to invest in gold without really having to worry much about how to store it physically, since units are allotted. Further, you can SIP into a gold fund. However, the expense ratio for a gold fund may be comparatively higher than for Gold ETFs (as it includes the additional fund management cost along with the cost of Gold ETFs). So, in that regard, gold ETFs have an upper edge.

    Having said that, both—gold ETFs and gold saving funds—are smart plus efficient ways to invest in gold. Hence, consider gifting your sister these paper gold investment avenues to safeguard her financial future.

    Axis Bank - 7 Financial Gifts for your Sister this Raksha Bandhan
  • Open a Savings Bank account for her
    If your sister does not hold a bank account, open one in her name with a reputed bank. The money you wish to gift can be deposited in this savings bank account. This would prove handy, earn her some interest, perhaps pocket money and give her the financial freedom to use the money as she desires. The debit-cum-ATM card that comes along can be used by her for shopping.

    Also introduce her to online banking which brings along the ease and convenience of banking
  • Make a Fixed Deposit in her name
    Besides opening a bank savings account, you can even contribute to a bank Fixed Deposit (also known as term deposit) for your dear sister. This will add to her financial security, earn her a better rate of interest vis-à-vis a savings bank and provide her with a source of income. But ensure that you’re selecting a reputed bank with a sound financial standing while parking money in fixed deposit.
  • Surprise her with a Gift Card
    Gift cards are prepaid cards offered by banks and widely accepted today at merchandise outlets and online shopping portals. Axis Bank has an e-gift card (also known virtual card) that allows you to instantly gift the receiver from anywhere and can be used at online merchants in India who accept a Visa card. The gift card comes with denomination ranging from Rs 500 to Rs 50,000 and is activated within hours and in case of e-gift card almost instantly.

    You don’t need to worry about the security of the money as it comes with a unique PIN, plus it’s easy to handle as opposed to doling out cash. A gift card can give your sister a chance to choose her gift within one year from the date of issue on account of validity. However, cash withdrawals are not permitted and such cards are non-reloadable.
  • Gift her a Credit Card:
    A credit card with perhaps a small credit limit can also demonstrate to be an extraordinary gesture from your side

    Moreover, a credit card will introduce her to credit management and its importance for a healthy better credit score (which reflects credit behaviour and credit worthiness). But when you handover one, subtly explain how to use it thoughtfully in order to avoid falling into a debt trap.

These thoughtful financial gifts for your sister will not only be cherished, but even add to her financial security and financial freedom, which as a true, loving, and caring brother you would always wish for.


NOTE WORTHY

Besides opening a bank savings account, you can even contribute to a bank Fixed Deposit (also known as term deposit) for your dear sister.

 

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