I am not going to put any numbers in this article but suffice it to say I have seen friends create millionaires out of their kids before the kid steps into college. Well, to the Manor Born.
For many people a kid’s birthday is about collecting and giving gifts. Cash, Jewelry, I pod, Walkman, barbie dolls, doll house, cycle…right? Well some people go beyond that. I have seen friends whose kids have a pan card, bank account and a PPF account by the time the kid is say 3 years old. For many of them the PPF account is just a default option and it just got opened.
Now you could do one of the following things. As soon as your kid is born you could (should) open a savings bank account and deposit all the gifts that she receives into that account. If you are a direct equity guy open a demat account and start accumulating blue chips.
Say it is your daughter’s birthday and you have Rs. 80,000 cash in that account. Sounds like a small sum, but it will fetch you say 60 shares of Hdfc Ltd. After some time you see that account having Rs. 12000 – you could start mimicking the index. So start with TCS. Infosys. Seriously you cannot go very wrong. Remember this is just a teaching account, not a performance account.
Let us say your daughter wants an Ipod costing Rs. 20,000. Give her the ipod and also put 20k into her account. Let us say you buy Hdfc bank shares with that. After 3 years let us say the shares are worth Rs. 40,000. You can explain how ‘not buying the Ipod’ would have meant she would have say Rs. 80,000 worth of Hdfc bank! Do not sell any of the shares, but do keep a note book to know which share was bought when and for what purpose or from which money. So “See your Mama’s gift of Rs. 25000 has become Rs. 180,000 in Siemens’ or ‘Your grandfather’s gift of Rs. 500,000 has become Rs. 10,00,000 in Cummins!
If you are not an equities person, even better, open a mutual fund account with Franklin Tempelton. Keep putting all the money whenever available into the Franklin India blue-chip. Assuming your daughter does not touch the investments for a very long time, she is bound to have a very good amount in her account.
What can she do with this money?
Well if it is a question that she has to answer. She could use it at her wedding, for her education, or just like that.If she has not touched it so far, she could even use it as a part of their retirement basket…
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