Instead of giving Kaineetam, Gift your Child a Rs100 monthly SIP

Vishu is the harvest festival of Keralam. Malayalis worldwide celebrate Vishu with Vishukanni — opening their eyes to a bouquet of decorated flowers, vegetables, fruits, rice, and god’s idol lit with a lamp. Vishu Sadhya — Rice served on a banana leaf with many dishes, like avial, thoran, pachadi, kootukari, achar, injipuli, papaddam, and chips. Vishu Padakkam — bursting firecrackers. And finally, the most important — Vishu Kaineetam — where elders hand out money to younger ones and bless them.

This article was written exclusively for The Week

[embed]Opinion: Instead of Vishu 'kaineetam', gift your child a ₹100 monthly SIP | Personal Finance Learn how to set up a monthly SIP or gift mutual funds to your children, teaching them financial literacywww.theweek.in

In my childhood, Vishu was always celebrated at my dad’s native place in the morning, and then we visited my mom’s native place in the afternoon. This ensured that I got Vishukaineetam from my dad’s parents and siblings, as well as my mom’s parents and her siblings. The pocket money collected was more than enough to buy a new pair of jeans and a T-shirt.

Times have changed. Now that I have become an elder person in the family, I have to give out Vishu Kaineetam to my kids, cousins, nephews, and nieces. Instead of giving them cash, let us notch it up a bit and try gifting them a monthly SIP of Rs100.

To gift Rs100, you might need to open a minor demat account for your kids. You might also have to ask your relatives to open a demat account for their kids. Setting up an SIP of Rs100 is easy for your kids, but for your nephews and nieces, you might have to use the gift mutual fund option. Let us discuss that today!

Step 1: Apply for a minor Pan Card.

Visit the website https://www.pan.utiitsl.com/PAN/ or https://onlineservices.proteantech.in/paam/endUserRegisterContact.html and apply for a new PAN card for your kid. If they already have one, you may skip this step.

The online application form is neatly presented, and this should be easy for you to complete. If you are not comfortable doing it online, you may even visit the nearest Akshaya Kendram.

Step 2: Apply for a minor bank account.

Visit any major bank and submit your kid's PAN card and Aadhaar copy to open a minor account for them. Make sure you take them along so they learn how the banking system works.

Step 3: Open a minor DEMAT account online.

There are many brokers providing minor demat accounts. Visit their website and apply for a minor demat account. This option may be available only if you already hold a demat account, as the child’s demat account is held as a secondary account to yours.

You will be prompted to enter your child’s PAN number and date of birth. Similarly, complete the entire procedure, and your account should be up and running in 2 to 3 days. Make sure you complete this process before 10th April, so that you can send the Vishu Kaineetam on the 15th.

Step 4: Schedule the SIP or Initiate Gift.

Once their demat account is ready, you could choose to either gift them the Vishu Kaineetam amount or set up a monthly SIP as per your preference. The amount that can be gifted or SIP’d starts at Rs100.

There are many mutual fund houses in India that allow transactions as low as Rs100. Open up the demat account and explore the mutual fund portal to see the various offerings. To set up a standing instruction, a process called a debit mandate is also required. This amount will be deducted from your bank account and credited to your child’s demat account.

To gift a mutual fund to your relative’s kids, you need to use the Gift-Transfer facility.

There are many advantages of setting up an SIP in your kid’s name.

1. Learn financial literacy — teaching them how to track their money, assess valuations, and calculate CAGRs is the right way to teach financial literacy.
2. Learn about the stock markets — investments in equity not only go up, but they can also go down and remain volatile. Accepting this risk:reward would help them learn more about the financial markets.
3. Power of Time — time is a good friend to assets and an enemy to liabilities. Learning to separate out the assets and liabilities by mapping them to the power of time is the best education that you could impart.
4. Prep them for Investing — when they get a job later, they will know how to handle their income and maximize accumulation. Their expenses would be under total control as they would prioritize investing over spending.

Thats it!

What are you waiting for? Open a demat account in your kid’s name and set them up on the right track for personal finance glory.

Balachandran Viswaram | SEBI Registered Investment Adviser — INA000021757, SEBI Registered Research Analyst — INH000025054

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