Mother's Day 2024: From SWP to health insurance, financial gifts for mom

Mother’s Day is a chance to show our appreciation for the tireless support and love our mothers give us. While flowers, cards, and chocolates are popular, why not consider a more practical and lasting gift this year?

Financial gifts can help your mother achieve financial independence and security. Here are some of the best financial gifts you can give her this Mother’s Day:

1. Systematic Withdrawal Plans (SWP)

Systematic Withdrawal Plans (SWP) will allow your mother to withdraw a fixed or variable amount regularly, be it monthly, quarterly, or annually. "The key benefit of a SWP is that it provides a steady income," says Aditya Kuchibhotla, Chartered Accountant and Executive & Business Coach. This is particularly useful for those needing regular income from their investments, such as retirees. It also reduces the risk of having to sell all investments during a market downturn.

How does a SWP work?

a. Choose a Mutual Fund Scheme: Select the mutual fund scheme you want to invest in and open an investment account with the fund house.

b. Select Investment Mode: Decide whether to invest via SIP (Systematic Investment Plan) or a lump sum.

c. Set Up the SWP: Instruct the fund house to withdraw a fixed amount of money from your fund at regular intervals, such as monthly, quarterly, or annually, and transfer it to your bank account.

d. Withdrawal Process: On the specified withdrawal date, the fund house will sell enough of your mutual fund units to meet the withdrawal amount and credit it to your bank account.

e. Ongoing Process: This process continues for the set period or until you cancel the SWP.

f. Remaining Balance: The remaining balance in your fund continues to earn returns based on the performance of the underlying assets. However, your account balance will decrease over time as you keep withdrawing money through the SWP.

2. Senior Citizens’ Savings Scheme

If your mother is over 60, consider opening a Senior Citizens’ Savings Scheme account. This safe investment option offers 7.4% assured returns with a tenure of five years. The interest rate may change quarterly, but once invested, the rate stays fixed for the full term. Managed by the government, this scheme pays interest every three months and allows investments up to Rs 15 lakh per individual.

3. Retirement Fund

A retirement fund is a practical gift that helps your mother build financial security for her later years. By setting up a retirement account and contributing regularly, you enable her to save for a comfortable future. Contributions to retirement mutual funds are tax-exempt up to Rs 1.5 lakh under Section 80CCC.

There are two main ways to invest in retirement funds:

Lump Sum Investment: Ideal for those with a healthy cash reserve, this method involves investing a substantial amount at once.

Systematic Investment Plan (SIP): This involves investing a fixed sum monthly, making it easier to manage and grow investments over time.

4. Real Estate Investment Trusts (REITs)

REITs are a unique gift idea, allowing your mother to invest in real estate without direct ownership. LC Mittal, Director at Motia Group, recommends REITs as they offer opportunities for rental income and capital appreciation from properties such as commercial buildings and healthcare facilities.

Advantages of REITs

Higher returns:

REITs offer good long-term returns, helping investors grow their wealth steadily over the years.

Stable income stream:

REITs must distribute at least 90% of their taxable income as dividends, providing a regular and attractive income stream, ideal for retirees seeking passive income.

Diversification and accessibility:

REITs allow access to a diversified real estate portfolio, including residential, commercial, and industrial properties, without requiring significant upfront investment. This diversification reduces risks associated with a single property or market.

Disadvantages of REITs

Market sensitivity:

REITs are affected by market fluctuations. Economic downturns or interest rate changes can impact their value, requiring a long-term investment outlook to manage volatility.

Interest rate sensitivity:

Changes in interest rates, influenced by the Reserve Bank of India's (RBI) repo rate adjustments, directly affect REIT returns. Higher interest rates usually lower the value of REIT stocks.

Tax implications:

Dividend income from REITs is taxed at the investor’s ordinary income tax rate, which can be higher than the capital gains tax rate. Not all REIT dividends qualify for preferred tax treatments. Consulting a tax professional is recommended to understand the tax implications.

5. Gold investment

While gold is a valued investment, managing its purity and liquidity can be challenging. Introduce your mother to paper gold, such as sovereign gold bonds or digital gold funds. These options provide the benefits of gold investment without the hassle of storage and security.

6. Medical insurance

Healthcare costs can be a significant burden as we age. Gifting your mother a health insurance policy can alleviate this financial strain. This gift ensures she has access to quality healthcare without worrying about the costs, providing peace of mind and financial security.

7. Empower her entrepreneurial spirit

"If your mother dreams of starting a micro-business from home, consider providing the necessary funds to help her realise her aspirations," suggests Vinnaayak Mehta, Founder of The Infinity Group. Whether it’s a plant nursery, cooking tutorials, art classes, or a mini bakery, support her endeavours by offering financial help and assistance in setting up her venture.

8. Sovereign Gold Bonds

"Sovereign Gold Bonds, issued by the government and backed by gold, are a unique and meaningful gift," recommends Vinnaayak Mehta. These bonds can be purchased in small denominations, starting from just one gram, making them an ideal Mother’s Day gift. They offer a convenient way to invest in gold without the hassle of storage, ensuring a thoughtful and lasting gift.